Pagaya acquiring asset firm Theorem in deal valued at tens of millions of dollars
Pagaya acquiring asset firm Theorem in deal valued at tens of millions of dollars
The Israeli company has decided to purchase the American firm, which manages assets amounting to $1.5 billion, despite the crisis in the consumer credit market.
Is the crisis in the consumer credit market an opportunity for growth? At least, that's what Pagaya believes with its acquisition of a competing company in the U.S. Calcalist has learned that Pagaya is purchasing American company Theorem, which manages assets amounting to $1.5 billion, in a deal valued at tens of millions of dollars.
After the purchase, Pagaya will manage a portfolio of assets amounting to $3 billion through its credit funds. Additionally, Pagaya is neutralizing competition from one of the entities that, besides managing investment funds in consumer credit, issues bonds backed by consumer credit.
Senior executives at Pagaya claim that the transaction is an expression of confidence in the American credit market, which is currently in crisis due to the high interest rate of 5.5%. This high interest rate led to a wave of redemptions in Pagaya funds, closing the possibility for investors to withdraw their money in full since the beginning of 2023.
Pagaya allows partial withdrawal of invested funds. Investors must choose between two options: receiving 10% of the withdrawal amount every quarter, with 40% in cash and the balance directed to a fund from which redemptions will be paid in the future; or withdrawing 20% in cash in equal quarterly installments, with the balance remaining in the fund.
The Opportunity Fund, Pagaya's largest fund, manages $1 billion. Estimates suggest that between $100 million and $200 million in capital seeks to exit the Pagaya funds but is blocked due to the company's management decisions.
Against the background of the freezing of funds, Pagaya announced the layoffs of 100 workers last month, following earlier layoffs of 140 workers in early 2023.
Pagaya explains that there is no direct relationship between the purchase, which originates from the company's equity, and the possibility of responding to withdrawal requests. These requests can only be fulfilled if new investors are added to the funds or if new capital is injected. Additionally, the purchase is a vote of confidence in the consumer credit market, with Pagaya deciding to increase its activity despite the pressure on the company to sell assets to service customer redemptions.
