Pagaya Technologies (PGY) risk factors, FY2025 10-K

Risks Related to the Operations of Our Business

1. 01We are a rapidly growing company, which may result in increased risks, uncertainties, expenses and difficulties, and it may be difficult to evaluate our future prospects100% rewritten
2. 02We were founded in 2016 and have experienced rapid growth in recent years in the markets we serve and we plan to continue to expand our product offerings and in existing and new markets. Assessing our business and future prospects may be difficult because of the risks and difficulties we faceNew
3. 03If we are not able to timely and effectively address these risks and difficulties as well as those described elsewhere in this “Risk Factors” section, our business, financial condition and results of operations may be harmed28% rewritten
4. 04solutions for the use of and access to financial products that we expect may slow down over time, and as a result, our financial performance may be adversely affected
5. 05If we fail to effectively manage our growth, our business, financial condition, and results of operations could be adversely affected. In addition, we may from time to time undertake internal corporate reorganizations that may adversely impact our business and results of operations
6. 06We have incurred U.S. GAAP net losses, and we may not be able to remain profitability in the future50% rewritten
7. 07Our business, financial condition and results of operations could be adversely affected as a result of an unexpected failure of a vendor, bank or other third party service provider that presents concentration risks to us or our PartnersNew
8. 08originate a majority of the loans or receivables facilitated with the assistance of our AI technology. The fees we earn when these loans or other assets are acquired from these Partners by Financing Vehicles account for a majority of our revenueNew
9. 09If we are unable to both retain existing Partners and attract and onboard new Partners on attractive commercial terms, our business, financial condition and results of operations could be adversely affected
10. 10Our ability to raise capital from asset investors is vital to our ability to offer products to Partners. If we are unable to raise capital from asset investors at competitive rates, or at all, it would materially reduce our revenue and cash flow and adversely affect our financial condition20% rewritten
11. 11The industry in which we operate is highly competitive, and if we fail to compete effectively, we could experience price reductions, reduced margins or loss of revenues
12. 12A significant portion of our current revenues are derived from Financing Vehicles that acquire consumer credit assets and related financial products, and as a result, we are particularly susceptible to fluctuations in consumer credit activity and the capital markets65% rewritten
13. 13If our estimates, judgments or assumptions relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected68% rewritten
14. 14If we are unable to manage the risks associated with fraudulent activity, our brand and reputation, business, financial condition, and results of operations could be adversely affected and we could face material legal, regulatory and financial exposure (including fines and other penalties)
15. 15We are subject to risks related to our dependency on our Founders, key personnel, employees and independent contractors, including highly-skilled technical experts, as well as attracting, retaining and developing human capital in a highly competitive market
16. 16The funding component of our business related to the Financing Vehicles is highly competitive
17. 17Although we currently maintain insurance coverage, such coverage may not be sufficient to cover the types or extent of claims or loss that may be incurred or received
18. 18If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected
19. 19If there is a pledge of a substantial amount of Pagaya Ordinary Shares, a change of control could occur and could materially and adversely affect our financial condition, results of operation and cash flows
20. 20A disruption or failure in services provided by third parties could materially and adversely affect our business25% rewritten
21. 21requirements may impact the ability of loan aggregators to provide their services, or to provide these services on commercially reasonable termsNew
22. 22We are exposed to risks relating to our incorporation and location in Israel
23. 23We could be adversely affected by the soundness of other financial institutions

Risks Related to Technology, Intellectual Property and Data

1. 24Regulators may assert, and courts may conclude, that certain uses of AI technology leads to unintentional bias or discrimination58% rewritten
2. 25We may be unable to sufficiently, and it may be difficult and costly to, obtain, maintain, protect, or enforce our intellectual property and other proprietary rights76% rewritten
3. 26Our technology relies in part on third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict our ability to utilize our technology and increase our costs
4. 27Our proprietary AI technology relies in part on the use of our Partners’ borrower data and third-party data, and if we lose the ability to use such data, or if such data contains gaps or inaccuracies, our business could be adversely affected
5. 28Cyberattacks, security breaches or similar compromise of our information technology systems, or those of third parties upon which we rely, or our data could adversely impact our brand and reputation and our business, operating results and financial condition68% rewritten
6. 29Under applicable employment laws, we may not be able to enforce covenants not to compete

Risks Related to our Single Family Rental (“SFR”) Operations

1. 30The SFR market is highly competitive, and we may be unable to compete successfully against our existing and future competitors
2. 31The single-family rental real estate market historically has also been seasonal, with greater demand in the spring and summer, and typically weaker demand in late fall and winter, resulting in fluctuations in the quantity, speed and price of transactions on our platform and lease activity
3. 32Our SFR Partners depend on residents and their willingness to meet their lease obligations and renew their leases. Poor tenant selection, defaults, and non-renewals by residents may adversely affect our reputation and the financial performance of our SFR operations
4. 33Our dependence upon third parties for key services may have an adverse effect on our operating results or reputation if the third parties fail to perform
5. 34We rely on information supplied by prospective residents in managing our business
6. 35We are subject to payment-related and leasing fraud from tenants and an increase in or failure to deal effectively with fraud, fraudulent activities, fictitious transactions, or illegal transactions
7. 36We may not be able to effectively control the timing and costs relating to the renovation and maintenance of our properties, which may adversely affect our SFR operations
8. 37Laws, regulations, and rules that affect the short-term rental and the long-term rental business may expose us to significant penalties, which could have an adverse effect on our SFR operations66% rewritten
9. 38If laws, regulations, rules, or agreements significantly restrict or discourage our customers in certain jurisdictions from leasing their properties, it could have an adverse effect on our SFR operationsNew

Risks Related to Dual Class Structure

1. 39The dual class structure of Pagaya Ordinary Shares has the effect of concentrating voting power with certain shareholders—in particular, our Founders—which will effectively eliminate your ability to influence the outcome of many important determinations and transactions, including a change in control
2. 40The dual class structure of Pagaya Ordinary Shares may adversely affect the trading market for Class A Ordinary Shares

Risks Related to Our Legal and Regulatory Environment

1. 41Litigation, regulatory actions, consumer complaints and compliance issues could subject us to significant fines, penalties, judgments, remediation costs and/or requirements resulting in increased expenses68% rewritten
2. 42from each other, which may complicate compliance efforts and increase legal risk and compliance costs for us and the third parties upon whom we relyNew
3. 43A heightened regulatory and enforcement environment in the financial services industry may have an adverse impact on our Partners and our business
4. 44If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements, our activities may be restricted, and our ability to conduct business could be materially adversely affected
5. 45The SEC oversees and directly regulates the activities of our subsidiaries that are registered investment advisers under the Investment Advisers Act
6. 46We and the Financing Vehicles rely on complex exemptions from statutes in conducting the funding component of our business
7. 47Securitizations expose us to certain risks, and we can provide no assurance that we will be able to access the securitization market in the future, which could materially and adversely affect our ability to execute on our business plan
8. 48We are subject to anti-corruption, anti-bribery, anti-money laundering, economic and trade sanctions and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations65% rewritten
9. 49We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, Partners, asset investors and agents, even if we do not authorize such activitiesNew
10. 50As the political and regulatory framework for AI technology and machine learning evolves, our business, financial condition and results of operations may be adversely affected68% rewritten
11. 51The CFPB has at times taken expansive views of its authority to regulate consumer financial services, creating uncertainty as to how the agency’s actions or the actions of any other new government agency could adversely affect our business, financial condition and results of operations52% rewritten
12. 52We may be subject to regulatory risks related to our operations in Israel
13. 53Uncertainty and instability resulting from the ongoing conflict between Russia and Ukraine could adversely affect our business, financial condition and operations

Risks Related to Our Operations in Israel

1. 54Conditions in Israel and relations between Israel and other countries could adversely affect our business, including current uncertainty and instability resulting from the war between Israel and various terrorist organizations, as well as other regional hostilities51% rewritten
2. 55A large concentration of our staff resides in Israel and many of our employees and independent contractors in Israel are required to perform military reserve duty, which may disrupt their work for us50% rewritten
3. 56Your rights and responsibilities as our shareholder will be governed by Israeli law, which differs in some respects from the law governing the rights and responsibilities of shareholders of U.S. and other non-Israeli corporations
4. 57Provisions of Israeli law and the Pagaya Articles may delay, prevent, or make undesirable an acquisition of all or a significant portion of our shares or assets

Risks Related to Being a Public Company

1. 58Our management team has limited experience managing a public company
2. 59We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives
3. 60If we fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired59% rewritten
4. 61Concentration of voting power among certain Shareholders, namely our Founders, will limit other shareholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over us
5. 62We do not intend to pay cash dividends for the foreseeable future
6. 63If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our share price and trading volume could decline

Risks Related to Ownership of our Class A Ordinary Shares and Warrants

1. 64The price of the Class A Ordinary Shares and the price of the public warrants have been and may continue to be volatile
2. 65Information available in public media that is published by third parties, including blogs, articles, message boards and social and other media, may include statements not attributable to us and may not be reliable or accurate
3. 66There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq
4. 67We may issue additional Class A Ordinary Shares from time to time, including under our equity incentive plans or as part of an acquisition
5. 68Our public warrants that were issued and exchanged for EJFA Private Placement Warrants are exercisable for Class A Ordinary Shares, the exercise of which would increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders53% rewritten
6. 69numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A Ordinary SharesNew
7. 70The public warrants may never be in the money, and they may expire worthless and the terms of the public warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment
8. 71Under certain circumstances, we may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to the holder, thereby making such public warrants worthless59% rewritten
9. 72price of our Class A Ordinary Shares. In addition, the fundamental change and change of control provisions associated with the 2029 Notes and 2030 Notes, respectively, may delay or prevent an otherwise beneficial takeover attempt of usNew
10. 73Our stock typically trades in low volumes daily which could lead to illiquidity, volatility, or depressed stock price

Risks Related to Tax

1. 74We and the Financing Vehicles are subject to tax laws, tariffs and potential tax audits in multiple jurisdictions that could affect our financial results
2. 75Changes in tax laws and unanticipated tax liabilities could adversely affect our financial results43% rewritten

Risks Related to R&D

1. 76We depend on highly skilled personnel to enhance our product and grow our business, and if we are unable to hire, integrate and retain our personnel, we may not be able to address competitive challenges and continue our rapid growth
2. 77If we do not continue to innovate and provide a platform, and improved policy model, that is useful to our customers, we may not remain competitive, and our revenue and operating results could suffer
3. 78Our future success will depend on our ability to develop the required new technologies or offer new and relevant products and service offerings to our Partners
4. 79We are required to continually gear our solution development efforts towards the needs of different partner segments (Asset class) or per his technology requirement including security related elements