Fintech startup Pagaya nears $9 billion SPAC deal


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Pagaya is led by co-founder and chief executive Gal Krubiner

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Pagaya Technologies Ltd. is close to an agreement to go public through a merger with a special-purpose acquisition company that will value the financial-technology startup at about $9 billion, people familiar with the matter said.

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Based in New York and Tel Aviv, Pagaya operates an artificial-intelligence network to make financial transactions more efficient and give more people the ability to borrow. Banks and other financial-service providers use its platform, which analyzes data to help partners serve more customers. People said that Pagaya is close to a deal to tie up with SPAC EJF Acquisition Corp. The merger may be announced this week.

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 about $95 million in the second quarter, and the company expects to expand into mortgage and insurance products, the people said.

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Founded in 2016, Pagaya will publicly join several startups in the sector and raise massive amounts of cash with investors excited about how software can disrupt finance. After going public through a traditional initial public offering late last year, shares of AI-lending firm Upstart Holdings Inc. rose nearly 560% in 2021, according to FactSet, giving the company a market share of about $20 billion. Value found.

Trading app eToro Group Ltd., personal-finance firm SoFi Technologies Inc. And digital mortgage lender Better Holdco Inc. has unveiled SPAC deals, each valuing the company at about $7 billion or more in 2021.

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Backed by investors including Singapore sovereign-wealth fund GIC Pte. Ltd., former American Express Company CEO Harvey Golub and insurer Aflac Inc. The venture capital arm of Pagaya, Pagaya, expects to raise about $200 million in a private investment in public equity, or PIPE, associated with its SPAC deal, the people said.

The EJF acquisition is backed by SPAC investment firm EJF Capital LLC and has approximately $290 million, although SPAC investors can withdraw their money ahead of the deal.

The $200 million PIPE is expected to come from funds managed by EJF Capital and investment vehicles associated with the firm, people said. 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, he said.

A SPAC is a shell company that raises money on a stock exchange and takes it public with the sole intention of merging with a private company. The private firm, often a startup, then occupies the SPAC position in the stock market. For many companies, SPAC deals have become a faster alternative to traditional IPOs, as they allow them to make business assumptions while going public. They are not allowed in IPOs.

More than 200 SPAC deals have been announced this year, which collectively value the companies at a record nearly $530 billion, Dealogic data shows.

Still, shares of several companies that merged with SPAC have plummeted in recent months, with some startups losing their financial goals or facing business disruptions, making it harder to complete deals and new ones. The construction of SPAC has been slow.

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