Company: PGYWW
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001883085-25-000050
Chunk: 236

Company: Pagaya Technologies Ltd.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 1A
Chunk 236
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 a combination thereof. The exchange of some or all of the Notes will dilute the ownership interests of existing shareholders to the extent we deliver Class A Ordinary Shares upon exchange of any of the Notes. Any sales in the public market of the Class A Ordinary Shares issuable upon such exchange could adversely affect prevailing market prices of our Class A Ordinary Shares. In addition, the existence of the Notes may encourage short selling by market participants that engage in hedging or arbitrage activity, and anticipated exchange of the Notes into our Class A Ordinary Shares could depress the price of our Class A Ordinary Shares.

The accounting method for reflecting the Notes on our balance sheet, accruing interest expense for the Notes and reflecting the underlying Class A Ordinary Shares in our reported diluted earnings per Class A Ordinary Share may adversely affect our reported earnings and financial condition. In accordance with applicable accounting standards, the Notes are reflected as a liability on our balance sheets, with the initial carrying amount equal to the principal amount of the Notes, net of issuance costs and the original issue discount. The issuance costs and the original issue discount are treated as a debt discount for accounting purposes, which will be amortized into interest expense over the term of the Notes. As a result of this amortization, the interest expense that we expect to recognize for the Notes for accounting purposes will be greater than the cash interest payments we will pay on the Notes, which will result in lower reported income or higher reported loss. Furthermore, if any of the conditions to the exchangeability of the Notes is satisfied, then we may be required under applicable accounting standards to reclassify the liability carrying value of the Notes as a current, rather than a long-term, liability. This reclassification could be required even if no noteholders exchange their Notes and could materially reduce our reported working capital.

In addition, the indenture governing the Notes contains certain provisions that allow holders of Notes to require us to purchase all or a portion of their Notes upon the occurrence of certain fundamental changes described in the indenture. These provisions and the provisions in the indenture requiring an increase to the exchange rate of the Notes for exchanges in connection with a make-whole fundamental change may, in certain circumstances, delay or prevent a takeover of us and the removal of incumbent management that might otherwise be beneficial to investors.

Our stock typically trades in low volumes daily which could lead to illiquidity, volatility, or depressed stock price.

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Our stock is listed on Nasdaq, but typically trades in low daily volumes. Because of a history of low trading