Company, which uses artificial intelligence to improve lending and other financial processes, is combining with EJF Acquisition
Pagaya Technologies Ltd. is going public through a merger with a special-purpose acquisition company that values the financial-technology startup at about $9 billion, the companies said.
Based in New York and Tel Aviv, Pagaya operates an artificial-intelligence network to make financial transactions like lending more efficient and give more people the ability to borrow. Banks and other financial-services providers use its platform, which analyzes troves of data to help partners serve more customers.
Pagaya is combining with the SPAC EJF Acquisition Corp. The Wall Street Journal previously reported that the two sides were nearing a deal.
Pagaya is led by co-founder and Chief Executive Gal Krubiner and works with companies in markets such as consumer loans, auto finance, credit cards and real estate. Its sales grew to roughly $95 million in the second quarter, and the company hopes to expand into mortgages and insurance products.
Working in new markets gives Pagaya’s network even more data, improving the platform and speeding up the firm’s growth, Mr. Krubiner said in an interview. “The amount of disruption that is happening here is really, really huge,” he said.
Founded in 2016, Pagaya joins a number of startups in the sector in going public and raising large sums of cash with investors excited about how software can disrupt finance. Shares of AI-lending firm Upstart Holdings Inc. are up some 560% in 2021, giving the company a market value of about $20 billion, according to FactSet, after it went public through a traditional initial public offering late last year.
Trading app eToro Group Ltd., personal-finance firm SoFi Technologies Inc. and digital mortgage lender Better Holdco Inc. have all unveiled SPAC deals valuing each of the companies at about $7 billion or more in 2021.
Backed by investors including Singapore sovereign-wealth fund GIC Pte. Ltd., former American Express Co. CEO Harvey Golub and the venture capital arm of insurer Aflac Inc., Pagaya is raising about $200 million in a private investment in public equity, or PIPE, associated with its SPAC deal.
The EJF Acquisition SPAC is backed by the investment firm EJF Capital LLC and has about $290 million on hand, though SPAC investors could pull their money out before a deal goes through.
The $200 million PIPE is expected to come from funds managed by EJF Capital and investment vehicles affiliated with the firm. EJF is known for investing in the financial-services sector and was co-founded by Emanuel “Manny” Friedman, who is expected to join Pagaya’s board of directors.
A SPAC is a shell company that raises money and trades on a stock exchange with the sole intent of merging with a private company to take it public. The private firm, often a startup, then gets the SPAC’s place in the stock market. SPAC deals have become faster alternatives to traditional IPOs for many companies, in part because they allow them to make business projections while going public. Those aren’t allowed in IPOs.
More than 200 SPAC deals have been announced this year that collectively value companies at a record of about $530 billion, Dealogic data show.
Still, shares of many companies that merged with SPACs have fallen in recent months with some startups missing their financial targets or hitting business snags, making it harder to complete deals and slowing the creation of new SPACs.