PGY Closes $400M RPM Deal: A Move to Further Diversify Funding?

Pagaya Technologies Ltd. PGY closed Revolving Pool Master (RPM) 2025-5, a $400-million asset-backed securities (ABS) transaction, backed by auto loans originated through its lending partners. The transaction received AAA ratings on its senior tranches and features One William Street Capital Management as the strategic funding partner, purchasing the residual certificates.

This deal marked Pagaya’s fifth auto ABS transaction in 2025, bringing its year-to-date auto ABS issuance to $1.7 billion, a record pace for the company.

With a resilient and adaptable business model, PGY has been actively expanding beyond its original focus on personal loans, moving into auto lending and point-of-sale financing for a long time now.

The Revolving Pool Master (RPM) program is PGY’s dedicated securitization platform, which allows it to regularly package and sell pools of auto loans originated by its lending partners to institutional investors. The platform is a key component of Pagaya’s capital markets strategy that enables it to diversify funding sources, enhance liquidity and recycle capital to support continued growth in auto loan originations.

Thus, with the help of a robust network of institutional funding partners and a focus on issuing ABS, Pagaya has been operating a capital-efficient model, largely avoiding holding loans on its balance sheet. PGY’s asset-light balance sheet model helps it minimize credit exposure and avoid significant loan write-downs, a way through which the company manages to preserve its financial flexibility even in turbulent environments.

Business Model of Pagaya’s Peers

Like PGY, Upstart Holdings, Inc. UPST is an artificial intelligence (AI)-based lending platform that aspires to become capital-light but often holds loans on its balance sheet temporarily. Its core business model involves finding financing for loans after its network of bank and institutional partners originates them.

Upstart partner banks can finance the loan by keeping it on their balance sheet. The bank can sell the whole loan on Upstart’s platform or use forward flow agreements from institutions that commit to buying a specific volume or type of loan originated on the Upstart platform in the future.

Upstart also uses securitization, wherein pools of loans are bundled together and sold as ABS to institutional investors. However, the firm frequently reverts to a balance-sheet-heavy model, especially in tight liquidity markets, making it more volatile and exposed to macro cycles.

Another close competitor of PGY is LendingTree TREE. But unlike PGY, LendingTree is a marketplace platform, not a lender. It matches consumers with financial product providers like mortgages, personal loans, credit cards and insurance.

LendingTree does not underwrite, originate, or hold loans. Hence, its balance sheet is not credit-heavy. TREE’s balance sheet is detached from revenue generation. The company is primarily structured to support a fee-based digital marketplace, not balance sheet lending.

PGY’s Price Performance, Valuation & Estimate Analysis

Investors have been bullish on the PGY stock, which has skyrocketed 198.4% in the past six months, outperforming the industry’s 26.1% growth.

Pagaya’s stock is currently trading at a 12-month forward price-to-sales (P/S) of 1.57X, which is below the industry average of 3.97X.

Over the past 60 days, the Zacks Consensus Estimate for PGY’s 2025 and 2026 earnings has moved higher to $2.65 and $3.40, respectively. The consensus estimate indicates 219.3% and 28.3% year-over-year growth for 2025 and 2026, respectively.

Currently, Pagaya sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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