Pagaya plunges 60% in pre-market trading

The date has arrived of the removal of the lock-up applying to half the shares in Israeli fintech company Pagaya Technologies (Nasdaq: PGY) held by its founders, shareholders whose holdings date from the time when the company was privately-held, and the SPAC with which it merged. The company’s share price has responded with a drop of 60% in pre-market trading on Nasdaq. Meanwhile, the company has filed a shelf prospectus with the US Securities and Exchange Commission for an offer for sale by shareholders.

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Pagaya provides financial companies with AI and big data-based technology meant to facilitate more precise allocation of credit to customers. The company went public in June when it completed a merger with a US SPAC at a valuation of $8.5 billion.

Despite the sharp decline on the financial markets in the period between the signing of the SPAC merger agreement about a year ago and the completion of the deal three months ago, the company’s valuation was not reduced, and most of the SPAC investors chose to redeem their investments rather than participate in the merger.

After a negative trend in the stock in its first weeks of being publicly traded, the trend suddenly and inexplicably changed, and for several successive days the price rocketed, rising more than tenfold within two weeks. For a short time, Pagaya was actually Israel’s most valuable company. The assessment was that this was a case of a short squeeze: since the float in Pagaya’s shares is very small, short sellers had difficulty in covering their positions, driving up the share price.

Although the trend changed again, and the share price has weakened considerably since the peak, the sharp rises in July were sufficient for the price to surpass the threshold set in the offering documents, so that instead of the holdings of parties at interest being locked up for six to twelve months, the removal of the lock-up was brought forward. As mentioned, half the shares are released today; the remainder will be released on December 19.

Published by Globes, Israel business news – en.globes.co.il – on September 20, 2022.

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