SoFi Technologies (NASDAQ: SOFI) has been a market laggard over the past six months. Given recent developments, things might not be about to get better. On March 17, Muddy Waters Research, a well-known short-selling firm, published a report on the fintech giant, making serious allegations, including calling it a “financial engineering treadmill.” Now, down 43% over the past six months (as of writing), some might jump at the opportunity to invest in SoFi at current levels, but is the stock worth it? Let’s find out.
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Muddy Waters’ report is long, but it boils down to this: SoFi is significantly inflating several key metrics through deceptive accounting tricks, questionable assumptions, and various other gimmicks that enrich the company’s executives at shareholders’ expense. To take one example, SoFi reported a personal loan charge-off rate — the percentage of loans a bank writes down as losses — of 2.80% for the fourth quarter of 2025 and a similar figure for the full year.
According to Muddy Waters, this number should be closer to 6.1%, a change that would materially decrease the company’s bottom line. And this is just one of the allegations in Muddy Waters’ report. According to the firm’s calculation, SoFi’s 2025 adjusted EBITDA (Earnings Before Interests, Taxes, Depreciation, and Amortization) should be $103 million, roughly 90% less than what the fintech specialist actually recorded.
Now, SoFi Technologies was quick to respond to these allegations via a press release, saying that the report demonstrates “a fundamental lack of understanding” of the company’s business. SoFi Technologies also said it is exploring possible legal actions against Muddy Waters Research. This may be the first episode of a saga that could last for a while.
Short-Sellers benefit from falling stock prices. So, it’s not like Muddy Waters has nothing to gain here, not that this means its allegations are false. That aside, despite the recent noise, there are good reasons to still be bullish on SoFi Technologies’ long-term prospects. It has established itself as a notable player in the growing online banking niche and is especially popular among younger people. SoFi Technologies aims to become a one-stop shop for all banking needs, from crypto investing to personal loans and estate planning.