SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2025

Share-Based Payment Arrangement [Abstract]

Share Options—Granted share options expire at the earlier of termination of employment or ten years from the date of grant. Share options generally vest over four years of the employment commencement date or with 25% vesting on the twelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the next three years. Any options, which are forfeited or not exercised before expiration, become available for future grants.

The following table summarizes the Company’s share option activity during the year ended December 31, 2025:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (000’s)




















Balance, December 31, 2024	4,042,901	$	7.5	6.7	$	7,335
Granted	2,500	9.7
Exercised	(734,988)	7.2
Forfeited	(112,700)	32.2
Balance, December 31, 2025	3,197,713	$	6.7	5.7	$	45,031
Vested and exercisable, December 31, 2025	2,647,978	$	5.0	5.1	$	41,795

The weighted-average grant date fair value of employee options granted, aggregate intrinsic value of options exercised, and fair value of share options vested for the year ended December 31, 2025 was $9.67, $9.6 million and $7.9 million, respectively.

Share-based compensation expense is based on the grant-date fair value on a straight-line basis for graded awards with only service conditions, which is generally the option vesting term of four years. The fair value of each option on the date of grant is determined using the Black Scholes-Merton (BSM) option pricing model using the single-option award approach with the assumptions set forth in the table below.

At December 31, 2025, unrecognized compensation expense related to unvested share options was approximately $5.6 million, which is expected to be recognized over a remaining weighted-average period of 1.3 years.

Fair Value of Ordinary Shares—The fair value of each ordinary share was based on the closing price of the Company’s publicly traded ordinary shares as reported on the date of the grant.

Expected Volatility—Expected volatility of share options was calculated based on the Company’s volatility as well as the implied volatilities from market comparisons of certain publicly traded companies and other factors.

Risk-Free Interest Rate—The risk-free interest rate is determined using a U.S. Treasury zero-coupon bonds for the period that coincides with the expected term set forth.

Expected Term— The expected term of share options represents the weighted average period the share options are expected to be outstanding. For option grants that are considered to be “plain vanilla”, the Company has opted to use the simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average time-to-vesting and the contractual life of the options.

Expected Dividend Yield—The dividend yield is based on the Company’s historical and future expectation of dividends payouts. Historically, the Company has not paid cash dividends and has no foreseeable plans to pay cash dividends in the future.

The assumptions used to estimate the fair value of share options granted for the year ended December 31, 2025 were as follows:


	2025
Expected volatility	105.4	%
Expected term (in years)	5.6
Risk free interest	4.1%
Dividend yield	0.00

Restricted Stock Units (RSUs)—RSUs generally vest over two years of the employment commencement date with 50% vesting on the twelve-month anniversary of the employment commencement date, and the remaining on a pro-rata basis each quarter over the remaining twelve months. RSUs granted are forfeited at termination of employment. Any RSUs, which are forfeited or not exercised before expiration, become available for future grants.

The following table summarizes the Company’s RSU activity during the year ended December 31, 2025:


	Number of RSUs	Weighted Average Grant Date Fair Value Per Share












Unvested at December 31, 2024	3,009,918	$	12.0
Granted	2,662,406	13.6
Vested	(2,838,979)	11.6
Forfeited	(683,172)	11.9
Unvested at December 31, 2025	2,150,173	$	14.5

At December 31, 2025, unrecognized compensation expense related to RSUs was approximately $24.9 million, which is expected to be recognized over a remaining weighted-average period of 0.8 years.

Options to Restricted Shares

In March 2021, the Company granted 18.7 million options to purchase restricted shares (the “First Awards”) at an exercise price of approximately $18.95 per share to certain directors and employees. These First Awards will vest upon the earlier of the following vesting conditions to occur of (i) a Transaction (defined as (a) a sale of all or substantially all assets or shares of the Company; or (b) a merger, consolidation, amalgamation or like transaction; or (c) a scheme of arrangement for the purpose of effecting such sale, merger, consolidation, amalgamation or other transaction) and (ii) Public Event (defined as an IPO or a SPAC) (each, a “Qualifying Event”). The Qualifying Event, further, contains additional market-based vesting conditions driven by the total value of the Company. The First Awards do not get accelerated upon any events. Any Awards that do not vest on such date (if such date is triggered by a Qualifying Event) will remain eligible for vesting following a Qualifying Event. However, any Awards that do not vest on or before the earlier to occur of a Transaction and the expiration date (10 years from the grant date) shall be forfeited.

In December 2021, the Company granted 0.4 million options to purchase restricted shares (the “Second Awards”) at an exercise price of approximately $40.59 per share to certain directors. These Second Awards will vest upon the earlier of the following vesting conditions to occur of a Qualifying Event. The Second Awards do not get accelerated upon any events. Any Awards that do not vest on such date (if such date is triggered by a Qualifying Event) will remain eligible for vesting following a Qualifying Event. However, any Awards that do not vest on or before the earlier to occur of a Transaction and the expiration date (10 years from the grant date) shall be forfeited.

In December 2021, the Company granted 0.6 million options to purchase restricted shares (the “Third Awards”) at an exercise price of approximately $37.38 per share to certain employees. These Third Awards will vest upon the following: (i) The Valuation-Based Vesting Condition may be satisfied at any date on or after March 31, 2022 based on the Total Value of the Company on such date (which shall be determined based on an independent third party valuation or, if the Company’s shares are publicly traded, based on the average trading price of a share of the Company over a period of sixty (60) days). Any options or shares received in connection with the exercise of an option that have not satisfied the Valuation-Based Vesting Condition on or prior to the tenth anniversary of the Grant Date (or such shorter period required by applicable law or for tax efficiency purposes) (the "Expiration Date") shall expire or be forfeited without consideration, as applicable, on the Expiration Date, and (ii) The Time-Based Vesting Condition shall be satisfied over a period of four (4) years commencing as of March 31, 2022, such that

25% of the options shall vest and become exercisable on March 31, 2023, 25% shall vest and become exercisable on March 31, 2024, 25% shall vest and become exercisable on March 31, 2025 and the remaining 25% shall vest and become exercisable on March 31, 2026 (rounded to the nearest number at each vesting date).

The following table summarized the Company’s options to restricted shares activity during the year ended December 31, 2025:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (000’s)
















Balance, December 31, 2024	19,948,408	$	19.4	6.2	$	—
Granted	—
Exercised	(34,179)	15.3
Forfeited	(29,244)	32.0
Balance, December 31, 2025	19,884,985	$	19.3	5.2	$	30,967
Vested and exercisable, December 31, 2025	16,539,026	$	19.3	5.2	$	26,643

At December 31, 2025, unrecognized compensation expense related to options to restricted shares was approximately $5.8 million, which is expected to be recognized over a remaining weighted-average period of 1.0 years.

Employee Stock Purchase Plan—The Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of our Class A Ordinary Shares at a discounted price, normally through payroll deductions, subject to the terms of the ESPP and applicable law. During the year ended December 31, 2025, 99,243 shares were issued under the ESPP. As of December 31, 2025, 733,470 shares of Class A Ordinary Shares were reserved for issuance under the ESPP. Compensation expense related to the ESPP was $0.6 million for the year ended December 31, 2025.

Share-Based Compensation Expense

The following table presents the components and classification of share-based compensation for the year ended December 31, 2025, 2024 and 2023 (in thousands):


	2025		2024		2023
Technology, data and product development	$	4,965	$	8,695	$	12,375
Selling and marketing	21,142		14,666		13,216
General and administrative	28,011		38,136		45,464
Total	$	54,118	$	61,497	$	71,055

Pagaya Technologies Ltd. 10-K