Introducing Pagaya (PGY)--similar to UPST, but cheaper and with steady revenue growth

I have been wanting to introduce Pagaya to this board for a few days but I haven’t found the time to do a proper write-up. I am submitting something that is too hasty so that I can share a link with you all to a Seeking Alpha write up of Pagaya that is quite thorough before it goes behind a paywall (hopefully it hasn’t done so already).

I have taken a 17% stake in Pagaya at an average price of $1.12.

My short term thesis is that this is an AI play that very few growth investors have heard of, but which has a similar business model to Upstart, is performing much better (in terms of revenue growth–I cannot speak to performance of its loans–both UPST and PGY say their loans perform well but I am not sophisticated enough to assess their claims) and is significantly cheaper with a small market cap. (I still have a stake in Upstart–more on that later.)

Pagaya grew revenues 57% in 2022 vs 2021 while Upstart revenues showed a slight decline over the same period. It has shown fairly steady growth each quarter, despite a dip in Q4 for 2022, which was announced in February.

Pagaya has a $779M market cap and trades at 0.6 times sales and 1.13 times book.

Upstart has a $2.27B market cap and trades at 1.87 times sales and 2.33 times book

Pagaya has several important partnerships, though I think the most important one to me is with SoFi, in which I also have a stake. I think SoFi understands credit. How do I know this? I don’t really, but I take great comfort in the fact that Harvey Schwartz, once a top contender to be CEO of Goldman Sachs, who is now CEO of Carlyle, and who has a strong credit background, sits on SoFI’s Board of Directors. I don’t think a company like that would use a credit-focused partner like Pagaya unless it thought Pagaya really knew what it was doing.

My medium to long term thesis is a belief I have stated here in the past, which is that the FICO score is a total dinosaur. Some company is going to figure out how to do better. I have no idea if it will be Upstart or Pagaya, but as far as I can tell they are the leading contenders at the moment. Given the TAM, the shares of both companies can go up A LOT before proving they have won the race to replace FICO.

I hope I have done a decent enough job of introducing this to at least keep myself from being banned from commenting again! I look forward to hearing your thoughts.

One other thing I will mention about Pagaya is something I have seen on Twitter but am not sure how to verify. It is that Tiger Global has a very large stake and has been selling shares, which has kept the price from taking off despite the AI mania. The usual method I have of tracking insider transactions shows no transactions at all in Pagaya, though that may be because it is an Israeli company.


Thanks for bringing PGY here!

And thanks for providing the Seeking Alpha link. I have a subscription there (well worth it!) and can’t say if it’s already behind the firewall. Good writeup there though.

I always like to see companies that may be on the cusp of turning profitable and this one looks interesting. I’ve added it to my watch list. I only have a TINY cash position, but maybe I can squeeze in a starter position. :wink:

He is no fool who gives what he cannot keep to gain what he cannot lose.


I tried to read the Seeking Alpha article but it seems to be behind the firewall now.

Here is the link to a 2 week old free Motely Fool article on it: This AI Stock Is Running Circles Around Upstart, and Wall Street Sees a 249% Upside | The Motley Fool

If you look at the 1 year chart you see it’s 52 week high is $34.50 which means it has lost over 96% of its value in the past year despite the growth and other statistics you mentioned above. Seems to be hit even harder than UPST.


The author seems to have missed a few things, might just be the timing of when the article was published and when the events occurred, but anyway, UPST has recently secured $4B in guaranteed funding which has allowed them to remove a lot of loans from their balance sheet. They claim that the remaining loans are predominantly auto loans which they are using for R&D to fine tune their auto lending product before it is marketed in earnest

The author also alludes to PGY making auto loans, but I think that was just an example rather than something they actually do. Auto loans secured at the dealership are complicated. It’s not like a personal loan.

As for the low volume of shorts, PGY’s average volume is about 2.5M. Nobody is going to short that.

The author does not have an opinion about the quality of PGY’s product as compared to UPST, but then asserts that this is field in which the better mousetrap actually wins. Seems to me that’s a crucial bit of information. UPST has a lot of data - a lot of data. And they’ve also got Paul Gu, one of the best data scientist in the world as a part owner (not likely to be hired away with a lucrative offer). There’s a lot of smart people, but this is pretty important competitive issue.

In a nutshell, I wouldn’t bet against UPST right now. There’s a lot more to the business than just evaluating credit, as UPST has learned. Marketing that service is not like shooting fish in a barrel.

But, PGY will be interesting to watch. I might buy a few shares just to remind myself to actually watch it. But I wouldn’t actually take a position.


In case folks did not notice, UPST is up 100% in the last 4 weeks since the new $4B funding commitment and a little short squeeze. And UPST gained a few more banking partners. My Schwab security loan AP interest has dropped from +30% to 10%. Of course, like others, I have lost a chunk of money on this company once their booboo was public. When a stock drops so much, the remaining value and percent of one’s portfolio may no longer be significant. Funny how that works. So might as well hold if you believe there is a possibility of a catalyst turnaround. This is what we exactly got… a bluebird. The next leg higher will likely require turning the macro economic corner.



Why do we need the macro-economic situation to turn the corner? The reason UPST fell is because the credit markets dried up due to interest rates rising too fast. Nobody wants to buy securitized loans when they don’t know where interest rates will settle at.

I contend that UPST does not need low rates, but rather relatively stable rates to succeed, and we have that now.


I do get your point on stable interest rates are what UPST needs to make money. But I am not sure UPST can significantly increase their loan volumes without a macroeconomic turnaround. High interest rates and weakening credit worthiness is likely to restrict loan volume until the economy rights itself. Unemployment is likely to increase. That’s my thinking anyway. But where is the recession anyway? I have been waiting a long time.