April 20, 2024

IPO News

The GameStop Effect & Factors Behind Pagaya’s Market Woes

Pagaya, an Israeli fintech startup, had a valuation of $20 billion four months ago, making it the most valuable company in Israel at the time. Nonetheless, Pagaya’s market cap has dropped dramatically, from $1.7 billion to $681 million. In June, Pagaya completed a SPAC merger and IPO on the Nasdaq with a valuation of $8.5 billion. After a short period, however, the company’s Fintech stock price dropped precipitously, now worth only about $2 billion. The “GameStop Syndrome” hit the company hard when it was revealed that fewer than 1 million Pagaya shares remained available to the market. Thus, Nasdaq plays a significant role in the delisting process.

The company’s decline was exacerbated when it filed with regulators in the middle of September to sell at least 46.1 million units of shares and as much as 674 million shares. The share price fell steadily throughout November, hitting a new low of less than $1. In order to be listed on the Nasdaq, share values must be at least $1 and preferably greater. For 30 days in a row, a company’s share price must be below $1 to get a warning notice for delisting.

The third-quarter network volume for Pagaya increased by 26% year over year to $1.9 billion, according to figures released earlier this month. The sum of sales and other revenue jumped by forty-nine percent to 204 million dollars. Share-based remuneration of $60.3 million was a major contributor to the $74.8 million net loss payable to Pagaya shareholders. In 2022, the firm anticipated a network volume of between 7.2 billion and 7.8 billion dollars, with revenues of between 700 million and 725 million dollars. The projected range is $(-)20 million to $(+)10 million.

The present macroeconomic cycle will not deter Pagaya from achieving its purpose, according to CEO Gal Krubiner. The company has established a unique business under the direction of a seasoned management team. Yet, investors aren’t convinced, and the business’s future needs to be clarified. The loss of Pagaya should serve as a warning against excessive pricing and market speculation. It’s a sobering reminder that even financially sound businesses aren’t immune to market swings or cash flow problems.

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