Shares of SoFi Technologies (SOFI) dropped 10.6% in March following a critical report from short-selling firm Muddy Waters Research, which accused the digital banking platform of questionable accounting practices. The firm claims SoFi is inflating its earnings through financial engineering, asserting that the actual net charge-off rate on its loans is significantly higher than reported. This scrutiny comes as SoFi’s stock has already declined 50% from its October 2025 highs.
The implications for SoFi are substantial, particularly as personal loans constitute a major part of its business, with $27.5 billion originated in 2025 alone. If the allegations hold true, SoFi could face not only regulatory challenges but also a potential write-down of its loan portfolio, jeopardizing its reported financial health and investor confidence.
Given the uncertainty surrounding its accounting practices and the potential for significant financial repercussions, market professionals should exercise caution and consider avoiding SoFi stock for the time being.
Source: fool.com