The phenomenal 700% rise in the share price of lossmaking Israeli fintech company Pagaya Technologies (Nasdaq: PGY) over the past week has pushed its market cap over $14 billion, as of the end of trading on Wednesday. Pagaya is now Israel's third most valuable company after Check Point Software Technologies Ltd. (Nasdaq: CHKP) with a market cap of $16.096 billion and SolarEdge Technologies (Nasdaq: SEDG) with a market cap of $18.011.
There is no obvious explanation for Pagaya's performance over the past week and no significant developments have been reported by the company. Whatever the reason for the rise, Pagaya's three founders Gal Krubiner, Yahav Yulzari, and Avital Pardo have become billionaires in dollar terms.
Pardo has shares worth about $3 billion and Krubiner and Yulzari $2 billion each. Before the completion of the SPAC merger, which saw Pagaya begin to be traded on Nasdaq last month, the trio consolidated their control of the company by making their shares Class B, with preferential voting rights, and the other shares Class A.
Pagaya, which was founded in 2016, provides solutions based on machine learning and big data that allow financial institutions to more accurately manage credit allocation procedures.
All three founders are still in their 30s and together hold shares worth an incredible $7.6 billion, on paper. The three cannot sell their shares yet because they are still blocked for between 90 days to one year after completion of the SPAC, depending on whether the shares are traded at over $12.50 for over 20 consecutive business days. But even if the share price collapses before the founders can cash in, they will not be paupers, having sold shares for a combined total of $200 million in secondary deals before the listing on Nasdaq.
Alongside the three founders, other major shareholders in Pagaya include Tiger Global, which has shares worth $1.5 billion, Viola Partners with shares worth $2.15 billion, and Clal Insurance which has shares worth $945 million.
In fact Pagaya lost most of its value in the week following its listing on Nasdaq on June 23. The subsequent phenomenal rise is attributed by most market sources to what is termed a short squeeze. In all likelihood, an investor bought Pagaya shares and took advantage of the very low float value of the share.
Meanwhile other investors who wanted to go short on the share, in other words profit from the share price falling, needed to borrow shares, but the smaller the float, the more difficult it has been for them to find shares to buy to return the shares they have borrowed. So many short traders have needed to buy shares to cover their positions, and this has been pushing the share price up.
Published by Globes, Israel business news - en.globes.co.il - on July 28 2022.
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