On Aug 22, 2022 we predicted that a certain clause regarding the lock-up period in the Pagaya’s (Nasdaq:PGY) SPAC merger agreement, would lead to volatile price actions favoring the downside.
“It will be interesting to observe the stock’s reaction once the VWAP clause is fulfilled, and it will be even more intriguing to see PGY’s reaction once the lock-up period is over. The expected behavior would be volatile price action favoring the downside, as stockholders like early investors and employees would like to “cash out” as soon as possible. That’s especially likely, considering Pagaya’s inflated price and market value.”
https://www.tipranks.com/news/pagaya-stock-nasdaqpgy-sell-offs-predicted-as-lock-up-period-ends-early
Almost a month has passed and it seems that our prediction came into effect. The stock is down almost 60% since we wrote the article.
Another prediction we had is that the lock-up period would end in the week starting September 18, and that early investors and employees would try to “cash-out” as soon as possible.
Takeaways About PGY Stock
Here’s a summary of recent events related to PGY stock:
- Pagaya (PGY) went public through a SPAC merger on June 17, 2022, with muted response from investors
- On July 20, 2022 Pagaya disclosed its low-float following the merger. That meant there was a very limited supply of stocks, out of the total shares outstanding, that were actually available for trading
- Following this disclosure, Pagaya’s shares rocketed more than 300%
- On August 22, 2022 a specific clause in the company SPAC merger agreement regarding the lock-up period came into effect, meaning that restricted shares could be sold the week starting September 18, 2022
- Our assumption was that the stock was being “maintained” at higher prices to allow this clause to come into effect. That assumption proved correct, as since the clause was activated, the stock fell more than 50%
We expect the downward momentum of the stock to continue, due to the fact that investors and employees will likely want to sell their stocks as soon as possible. Ultimately, there currently seems to be minimal demand for PGY stock.
