What happened
Shares of Pagaya Technologies (PGY +3.59%), a little-known Israeli fintech company, were going to the moon Friday on an apparent short squeeze a month after the company went public through a special-purpose acquisition company (SPAC) merger.
As of 1:03 p.m. ET, the stock was up by 95%.
NASDAQ: PGY
Key Data Points
So what
There was no news out on Pagaya Friday, making the stock's surge reminiscent of the short squeezes executed on meme stocks like GameStop and AMC Entertainment last year. However, the source of the squeeze was unclear. There was, for example, no chatter about it on Reddit's WallStreetBets forum, which spawned many of last year's short squeezes and gamma squeezes.
On Twitter, traders were commenting on the short squeeze. A month ago, the company completed its SPAC merger with EJF Acquisition, after which the price drifted downward until it had a pop earlier this week and then its sharp surge Friday. One trader outlined the strategy in a tweet the day after the SPAC merger closed.
Looking at $PGY for a potential high-redemption short squeeze play.
-- Beef Spacington Capital 🦄 (@beefwellingtoni) June 23, 2022
Obviously not a guaranteed low-floater
According to data from Yahoo! Finance, Pagaya's float is just 336,000 shares out of the stock's 458 million total shares outstanding, meaning only a tiny percentage of the stock is actively traded and not held by insiders. Of that float, roughly 50% is sold short, making the stock a prime candidate for a short squeeze.
Now what
Pagaya posted revenue of $475 million in 2021, up 379% from the year before. Its market cap reached $7.7 billion Friday, giving the stock a price-to-sales ratio of about 16. If it can keep up its rapid pace of growth, that valuation would be justified, but it wouldn't be surprising to see the impact of this short squeeze fade over time as traders pocket their gains.
