A short-seller ripped into Pagaya Technologies (NASDAQ: PGY) in a report published on Tuesday, and the market reacted accordingly. The document raised enough concern to generate an investor sell-off, with the stock closing 13% lower as a result. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) essentially flatlined on the day.
Sweeping allegations
The firm behind the report is Iceberg Research, a business with a history of disseminating highly critical analyses of stocks it has shorted.
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In its latest report, bearing the incendiary title "Pagaya: Using Other People's Money to Hide Massive Losses," Iceberg leveled a clutch of accusations against the fintech. Among other transgressions, the short-seller effectively said Pagaya is engaging in self-dealing in some of its loan transactions.
Referring to the asset-based securities (ABSes) into which it packages many of its loans, Iceberg said, "The market derives comfort from the fact that Pagaya offloads risk by selling the lowest ABS tranches to what it believes are third-party investors. In reality, Pagaya has used a fund it manages as a general partner to buy these tranches."
The short-seller also had plenty to say about company management, implying that its CTO, COO, and president were all involved in irregularities prior to taking their positions at Pagaya.
Pagaya has not yet responded to the Iceberg report.
Keep self-interest in mind
We should always bear in mind that when an admitted short-seller publishes such a report, at least part of its intention is to drive down the relevant stock's price. That being said, the Pagaya analysis does raise several concerning points about the company, which has a history of consistent -- and at times, rather deep -- losses.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Pagaya Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
