Why SoFi Technologies Stock Fell 10.6% Last Month

SoFi Technologies (NASDAQ: SOFI) stock got hit with a double-digit valuation pullback in March. The fintech company's share price moved 10.6% lower in the month. For comparison, the S&P 500's level declined 5.1% in the month, and the Nasdaq Composite's level fell 4.8%.

SoFi stock saw sell-offs last month as investors made risk-off trades in response to the U.S. and Israel's war with Iran. Its share price also saw pullbacks in conjunction with a short report on the company released by Muddy Waters.

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SoFi stock faced pressures on two main fronts in March

Like most stocks, SoFi saw a substantial valuation pullback last month as geopolitical developments made investors more risk-averse. The U.S. and Israel kicked off joint strikes against Iran at the end of February, and fighting intensified last month.

SoFi stock faced another round of pressures mid-month following a new short report on the company. Muddy Waters Research published a report on March 17 stating that it had taken a short position in the fintech specialist and outlining what it sees as problem points for the business. Notably, Muddy Waters raised concerns about financial engineering, improper accounting practices, and opaque transactions not detailed on SoFi's balance sheets that obscure underlying performance.

In particular, the short seller believes that SoFi has misstated at least $312 million in unrecorded debt. Muddy Waters also calculates that SoFi's personal loan charge-off rate is actually roughly 6.1% and not the 2.89% level reported by the company. The research team also alleges that SoFi's student loan business exists for financial engineering purposes rather than strategic or economic reasons, stating that the student-loan business was being used to produce fair-value gains used to qualify bonus payments to the management team.

Following the release of the short report, SoFi published a response and stated that it believed the report was designed to deceive investors. SoFi's response said that Muddy Waters' report showed a fundamental lack of understanding when it came to its financial statements and business. The company also said that it intended to explore potential legal action against Muddy Waters for what it described as a "factually inaccurate and misleading report."

Investors will be getting a closer look into SoFi's recent performance in the very near future. The company is scheduled to publish its first-quarter results and host a conference call before the market opens on April 29.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.