We continue to monitor the trajectory of Israeli fintech company Pagaya (Nasdaq:PGY). Understanding Pagaya’s story will help delineate the factors that could affect a stock’s movement, especially those factors that are irrelevant to the company’s financial performance. Some of these factors include limited availability of stocks to trade (know as “free float” or “public float”), “Short Squeezes,” and actions by current shareholders.
Since we published our latest article on Pagaya, “The Writing was on the Wall, and It Still Is” the stock has declined more than 60%. That happened not because the company reported a loss or lowered its guidance, but because the lock-up period for half of the locked-up stocks ended.
We believe that when that period ended, many of the current shareholders and employees sold some of their stocks as fast as they could, for any price they could get. Our assumption is that even after the massive decline in stock price occurred, the stock sales still brought profit to the current shareholders.
Our assumption is affirmed through the text of the company’s SEC filing:
“The sale of the Resale Securities, or the perception that these sales could occur, could depress the market price of our securities. …. While these selling securityholders may, on average, experience a positive rate of return based on the current market price, public securityholders may not experience a similar rate of return on the securities they purchased if there is such a decline in price and due to differences in the purchase prices and the current market price.”
Which Insiders Sold PGY Stock?
What we know for sure is that the three founders have already started selling stocks through their “10b5-1 Sales Plan.” On September 20, 2022 the following sales occurred:
- CEO, Co-Founder and Director Gal Krubiner has sold 126,281 shares valued at $882,704
- CRO, Co-Founder and Director Yahav Yulzari has sold 123,606 shares valued at $868,006
- CTO, Co-Founder and Director Avital Pardo sold 122,644 shares valued at $857,282
These sells should not be taken as a non-vote of confidence in the company, as they are scheduled sells which were part of a pre-defined plan.
It is worth noting, though, that the price at which the founders were able to sell, which was $7.00, was not available to the “common” people on September 20, 2022.
Pagaya’s Next Important Date
As we previously mentioned, only half of the locked-up shares are available to be traded now. The second half will be available to trade only on December 19, 2022.
Per the company’s filing from September 20, 2022:
“Certain of our shareholders are subject to the lock-up provisions in the Pagaya Articles. These Lock-Up Agreements entered into in connection with the Merger set forth that certain lock-up restrictions will expire in the six to twelve months following closing of the Merger, or earlier if certain trading price thresholds are achieved. As a result of our share price satisfying certain of these price thresholds, the lock-up restrictions will expire (i) on September 20, 2022, with respect to 50% of the Lock-Up Shares owned by Pagaya Equity Holders and their permitted transferees and (ii) on December 19, 2022, with respect to the remaining 50% of the Lock-Up Shares owned by Pagaya Equity Holders.”
- Half of the locked-up stock is now available to be sold, and has been so since September 20, 2022.
- The next half will be available for trading on December 19, 2022.
- The three founders have started selling their public shares, after already having earned cash, to the tune of $28.3M, on the secondary sale of Pagaya Ordinary Shares (the “Secondary Sale”)