Pegasystems Suffers Adverse Ruling in Appian Case; FVE Down to $104

We are lowering our fair value estimate for Pegasystems to $104 per share, from $120 previously, as a circuit court for Fairfax County, Virginia ruled against narrow-moat Pegasystems and awarded Appian $2.036 billion in damages for trade secret misappropriation in an ongoing legal dispute brought by Appian in 2020. In an 8-K filing, Pegasystems stated it strongly disagrees with the verdict and will appeal, which we believe can take years to reach a resolution. Our new fair value is based on an assumed payout of $1 billion in 2024 financed entirely by an equity raise, as we think it is possible that the appeal could reduce the damages to be paid out by Pegasystems. We acknowledge that there is a high degree of uncertainty around our loss assumptions, and we intend to update our estimates over time as we gather new information.