Quite a few Israeli technology companies are trading on Wall Street today at a share price of less than one dollar, which puts them at risk of being delisted from trading, following the declines in the markets and the changes in investor preferences. However, it’s hard to find a stock that has fallen from $30 levels as fast as the fintech company’s Pagaia which for one moment became the Israeli company with the highest value on Wall Street.
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Fagaya, a losing company that was merged into a SPAC company last June, jumped 12 times in two weeks to record levels it reached in early August, and for a short time was traded at a value of about 20 billion dollars, more than any other Israeli company, including established technology giants such as Solaredge, Check Point and nice
As is well known, the sharp increases in the stock resulted from an extreme case of “short squeeze” – investors who bet against the stock and entered short positions were forced to purchase the shares to exit the position when the stock began to rise, and due to a lack of floating goods (tradable shares), the price soared.
However, since then the trend has changed, the Pagaya share has deteriorated by 97% from the record and reached at the beginning of the current trading week to 99 cents, a price that reflects the company’s value of 674 million dollars.
Fagaia was merged into a SPAC (a non-active company established for the purpose of acquiring an existing activity) at a value of 8.5 billion dollars. Although several months passed between the report of the merger and its completion, during which the market situation deteriorated greatly, the determined value remained unchanged.
A period of six months to return to the minimum price
Recently, the CEO of Pagaia and one of its founders, Gal Krobiner, was interviewed by Globes, and said that even today it is not clear to the company and its managers what led to the rise in the share price in the summer. Crazy, 24/7, on the plane. So when you enter into day-to-day practice, this thing has no effect.”
According to him, there was no plan to redeem shares: “Share redemptions don’t work like that, and there is no desire either. We came here to build something that is very sustainable.” Regarding the fall in the stock since then, he said, “It sharpens the investors’ view of our business. People are checking how good our business is.”
In both the New York Stock Exchange and the Nasdaq Stock Exchange, the share price must be higher than one dollar for a long time, in order for the traded company to continue to meet the conditions of trading on the stock exchange. After 30 days of a lock price below the dollar, the company receives a warning letter from the management of the stock exchange, and must act and correct the the situation, or its stock will be delisted.
If Fagaya’s stock continues to trade below the threshold price of a dollar, it too will receive a warning letter, similar to other Israeli companies that have recently received such letters, among them the autotech companies Autonomo and REE, which also came to the public market through a merger with a SPAC company.
In any case, it is not a quick or immediate procedure: the companies that are warned by the management of the stock exchanges receive a period of six months in which they are required to meet the minimum price conditions again, and in many cases the period can be extended by another six months.
In fact, these companies can fix the situation technically relatively easily, by performing a capital consolidation (reverse split) in which any number of shares are consolidated into one share, and thus several shares that previously traded at a price of less than a dollar become one share that trades above a dollar.
Such a move was recently made by the digital insurance company Hippo, which, after its stock fell by about 90% since it was merged into a SPAC, consolidated all 25 of its shares into one share, and moved away from the danger of a too low share price.
Fagaya provides solutions based on machine learning and big data in order to enable financial entities to more accurately manage the credit allocation process. The company was founded by the CEO Krobiner and his two partners, Avital Pardo and Yahav Yolzari.