What happened

Shares of Pagaya Technologies (PGY -4.04%) took a 51.9% haircut in August 2022, according to data from S&P Global Market Intelligence. However, the stock also rose by a thrilling 494% in July. Pagaya investors pocketed a total gain of 185%, measured across those two months.

So what

As extreme as these moves may seem, they are actually quite common for stocks like Pagaya. The company entered the public stock market at the very end of June. Brand-new tickers are often prone to massive volatility until the market gets a feel for what this new name is and how its market price should be calculated.

That's especially true for stocks entering the market through a so-called special purpose acquisition company (SPAC). Pagaya took that ultra-volatile route through a merger with a SPAC called EJF Acquisition Corp. After the merger, Pagaya started its publicly traded life with a market capitalization of $8.5 billion. That's one of the largest SPAC deals ever completed for an Israel-based company and a splashy market entry, regardless of the company's roots.

The company published its first quarterly report in August, with 83% year-over-year revenue growth. Pagaya's artificial intelligence network processed $1.9 billion of loan and credit card approvals during the quarter. However, the report barely moved Pagaya's stock price, which continued to jump and fall as investors digested news and speculation concerning the SPAC stock's development.

Now what

In late July, Pagaya disclosed that it made less than 1 million shares available on the public market, followed by a stock split at a 1-to-186.9 ratio. Later, the earnings report said that the company had 846 million shares outstanding.

In other words, at least three-quarters of Pagaya's fully diluted shares appear to be in the hands of the people and companies that owned Pagaya shares before the SPAC deal. They are not yet able to sell their stock (or buy more) on the open market, with lockup periods ranging from 90 days to a full year after the SPAC deal's execution.

So Pagaya investors are still trying to work out exactly how large a portion of the company they actually own today, and how the lockup expiration events may affect their holdings in the long run. This uncertainty will take some time to straighten out.

The process is not made any easier by the current market tenor, where many investors are backing away from high-octane growth stocks and recent SPAC tickers. Pagaya ticks both of those boxes, trading at a lofty 16 times trailing sales today.

Market makers have many reasons to continue driving Pagaya's share prices lower. The financial technology expert runs a promising business, but its entrance into the stock market was an eyesore. Pagaya may become an interesting investment idea in the long run, but the company needs to settle the SPAC mess first.