Pagaya Announces Effective Date for Reverse Stock Split
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Insights
A reverse stock split is a financial maneuver where a company reduces its total number of shares in the market by consolidating multiple shares into one. Pagaya Technologies Ltd.'s decision to implement a 1-for-12 reverse stock split will significantly reduce the number of its outstanding shares from around 605.1 million to approximately 50.4 million. This action can be interpreted as an attempt to increase the stock's price per share, as the market capitalization remains unchanged, but the number of shares decreases, leading to a higher price per remaining share.
The immediate effect will likely be an increase in the nominal share price, which could make the stock more attractive to institutional investors who may perceive it as more stable or legitimate. Furthermore, the reduction in shares could facilitate the company's inclusion in major U.S. equity indices, potentially leading to increased demand for the stock due to index funds and exchange-traded funds that track these indices being required to purchase shares. However, the market's perception of reverse splits can be mixed, as they may also signal a company's previous difficulty in maintaining a higher stock price and can thus be viewed as a cosmetic improvement rather than a reflection of fundamental growth.
From a marketability perspective, the reverse stock split by Pagaya Technologies aims to enhance the appeal of its shares among the U.S. investment community. Stocks trading at higher prices are often less volatile and can be perceived as more credible. Additionally, being included in major U.S. equity indices is not only a mark of prestige but also leads to automatic buying from index funds, thereby potentially increasing trading liquidity. This liquidity is important for new investors who look for the ability to enter and exit positions with ease.
It's important to note that while the reverse split does not inherently add value to the company, it can lead to a more favorable trading environment. However, the company must continue to perform well fundamentally to sustain any positive effects from the reverse split. Investors will monitor the company's performance closely following the split to gauge the effectiveness of this strategy. It will be critical for Pagaya to demonstrate that the reverse split is part of a broader strategy aimed at delivering long-term shareholder value through operational excellence and not merely a short-term tactic to adjust stock price.
Legally, a reverse stock split requires shareholder approval, which Pagaya has secured. This ensures that the action is in line with corporate governance practices. The split will not alter shareholders' relative interests in the company, except for adjustments due to fractional shares. It is common for fractional shares not to be issued; instead, they are rounded down to the nearest whole number, which may lead to minor losses for some shareholders holding a number of shares not divisible by 12.
Additionally, the company will make proportionate adjustments to outstanding warrants, stock options and equity incentive plans, which is a standard procedure to ensure that the terms of these financial instruments remain fair and equitable post-split. This process maintains the value of these instruments for their holders and aligns with legal and financial standards. The company's transparency in communicating these changes is crucial for maintaining trust with shareholders and the market.
- PGY ordinary shares expected to begin trading on a split-adjusted basis on Friday, March 8, 2024
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Reverse split is part of the Company’s actions to enhance marketability of its stock to
U.S. investment community
The reverse stock split was approved by the Company’s shareholders at a special meeting held on February 15, 2024. The split is one of the Company's strategic actions to enhance the marketability of its stock to the
At the effective time of the reverse split, every 12 issued and outstanding shares of the Company's ordinary shares will automatically be converted into one issued and outstanding share of the Company's ordinary shares, without any change in the par value per share. Fractional shares will not be issued in connection with the reverse stock split. All fractional shares will be rounded down to the nearest whole number. The reverse stock split will affect all shareholders uniformly and will not alter any shareholder's relative interest in the company's equity, except for any adjustments for fractional shares. In addition, proportionate adjustments will be made to the number of shares underlying, and the exercise or conversion prices of, the company's outstanding warrants and stock options, and to the number of shares of common stock issuable under the company's equity incentive plans.
The reverse stock split will reduce the number of the Company’s issued and outstanding Class A Ordinary Shares from approximately 605.1 million shares to approximately 50.4 million shares.
About Pagaya Technologies
Pagaya (NASDAQ: PGY) is a global technology company making life-changing financial products and services available to more people nationwide. By using machine learning, a vast data network and a sophisticated AI-driven approach, Pagaya provides comprehensive consumer credit and residential real estate solutions for its partners, their customers, and investors. Its proprietary API and capital solutions integrate into its network of partners to deliver seamless user experiences and greater access to the mainstream economy. Pagaya has offices in
Cautionary Note About Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. These forward-looking statements generally are identified by the words “anticipate,” “believe,” “continue,” “can,” “could,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “future,” “strategy,” “might,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. All statements other than statements of historical fact are forward-looking statements, including statements regarding the Company’s ability to effectively implement the reverse share split. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements reflect the Company's views with respect to future events as of the date hereof and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, investors should not place undue reliance on these forward-looking statements. The forward-looking statements are made as of the date hereof, reflect the Company’s current beliefs and are based on information currently available as of the date they are made, and the Company assumes no obligation and does not intend to update these forward-looking statements.
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Source: Pagaya Technologies Ltd.
FAQ
When will PGY ordinary shares begin trading on a split-adjusted basis?
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What will happen to fractional shares in connection with the reverse stock split for PGY?
