v3.26.1
Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock
 6 Months Ended
Jun. 30, 2026
Stockholders' Equity Note [Abstract]  
Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock Convertible Preferred Stock, Convertible Preferred Stock Warrant Liability and Common Stock
Convertible Preferred Stock and Warrants
Under PMI’s amended and restated certificate of incorporation, preferred stock is issuable in series, and the Board is authorized to determine the rights, preferences, and terms of each series.
On July 13, 2020, the Company established Prosper Grantor Trust (“PGT”), a revocable grantor trust administered by an independent trustee, with the intention of contributing assets to PGT for the benefit of PMI employees in the event of a change in control through an Eligible Employee Retention Plan. PGT was determined to be a VIE and PMI was determined to be its primary beneficiary due to the fact that the Company, through its role as the grantor, has both (a) the power to direct the activities that most significantly affect the VIE’s economic performance, including its funding decisions and investment strategy, and (b) the obligation to absorb losses that could be potentially significant to the economic performance of the VIE by virtue of the Company’s requirement to fund PGT in the event that it is unable to meet its obligations to PMI’s employees. PMI also maintains a contingent call liability on PGT’s assets in the event of a bankruptcy. As a result, PGT is fully consolidated into PMI’s condensed consolidated financial statements.
On July 21, 2020, PGT entered into a Stock Transfer Agreement with a PMI investor to purchase 34,670,420 shares of Series A Convertible Preferred Stock and 16,577,495 shares of Series B Convertible Preferred Stock for nominal consideration. On June 30, 2026, PGT entered into a Stock Transfer Agreement with another PMI investor to purchase 55,395 shares of Series A Convertible Preferred Stock, 58,165 shares of Series A-1 Convertible Preferred Stock and 244,130 shares of Common Stock for nominal consideration. Upon execution of the Stock Transfer Agreements, these shares were purchased by a consolidated VIE of the Company, and thus the difference between the fair value of the repurchased preferred stock and the purchase price is included in Convertible Preferred Stock Held by Consolidated VIE on PMI’s accompanying condensed consolidated balance sheets. The difference between the fair value of the repurchased common stock and the purchase price is included in Common
Stock and Additional Paid-In Capital on PMI’s accompanying condensed consolidated balance sheets. These shares remain outstanding for legal purposes and retain their voting rights, but are excluded from the earnings per share calculation.
On May 5, 2026, one PMI investor forfeited 289,560 shares of Series A Convertible Preferred Stock to the Company for no consideration. These shares are no longer considered issued and outstanding, and are excluded from the earnings per share calculation.
The number of authorized, issued and outstanding shares, their par value and liquidation preference for each series of convertible preferred stock as of June 30, 2026 are disclosed in the table below (amounts in thousands except share and par value amounts):
Convertible Preferred Stock
Par Value
Authorized
Shares
Outstanding and Issued Shares
Liquidation
Preference, Outstanding Shares
Series A$0.01 68,558,220 66,138,625 *$19,076 
Series A-1$0.01 24,760,915 22,515,315 *45,031 
Series B$0.01 35,775,880 35,127,160 *21,190 
Series C$0.01 24,404,770 24,404,770 70,075 
Series D$0.01 23,888,640 23,888,640 165,000 
Series E-1$0.01 35,544,141 35,544,141 30,000 
Series E-2$0.01 16,858,078 — — 
Series F$0.01 177,720,707 177,115,839 149,489 
Series G$0.01 37,249,497 37,249,497 50,000 
Total444,760,848 421,983,987 $549,861 
* Series A, Series A-1 and Series B Convertible Preferred Stock totals are inclusive of 34,725,815, 58,165 and 16,577,495 shares, respectively, held by PGT, a consolidated VIE.
Dividends
Dividends on shares of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F and Series G convertible preferred stock are payable only when, as, and if declared by the Board. No dividends will be paid with respect to the common stock until any declared dividends on the Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, and Series G convertible preferred stock have been paid or set aside for payment to the Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, and Series G convertible preferred stockholders. After payment of any such dividends, any additional dividends or distributions will be distributed among all holders of common stock and preferred stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of preferred stock were converted to common stock at the then-effective conversion rate. The Series A-1 convertible preferred shares have no dividend rights. To date, no dividends have been declared on any of PMI’s preferred stock or common stock.
Conversion
Under the terms of PMI’s amended and restated certificate of incorporation, the holders of preferred stock have the right to convert such preferred stock into common stock at any time. In addition, all preferred stock automatically converts into common stock (i) immediately prior to the closing of an initial public offering that values Prosper at least at $2 billion and that results in aggregate proceeds to Prosper of at least $100 million or (ii) upon a written request from the holders of at least 60% of the voting power of the outstanding preferred stock (on an as-converted basis), provided that (i) the Series A-1 convertible preferred stock shall not be converted without at least 14% of the voting power of the outstanding Series A-1 convertible preferred stock; (ii) the Series D shall not be converted without at least 60% of the voting power of the outstanding Series D; (iii) the Series E-1 and Series E-2 shall not be converted without at least 60% of the voting power of the outstanding Series E-1 and Series E-2, voting together as a single class; (iv) the Series F shall not be converted without at least 60% of the voting power of the outstanding Series F, and (v) the shares of Series G Preferred Stock will not be automatically converted unless the holders of at least 60% of the outstanding shares of Series G Preferred Stock approve such conversion. In addition, if a holder of the Series A convertible preferred stock has converted any of the Series A convertible preferred stock, then all of such holder’s shares of Series A-1 convertible preferred stock also will be converted upon a liquidation event (as defined under the certificate of incorporation). In lieu of any fractional shares of common stock to which a holder would otherwise be entitled, PMI shall pay such holder cash in an amount equal to the fair market value of such fractional shares, as determined by the Board. At present, each of the Series A, Series B, Series C, Series D, Series E-1, Series E-2, and Series F convertible preferred stock converts into PMI common stock at a 1:1 ratio. The Series A-1 convertible preferred stock converts into common stock at
a 1,000,000:1 ratio and the Series G convertible preferred stock converts into common stock at a 1:1.36 ratio. The Series G convertible preferred stock conversion ratio reflects the Series G true-up that occurred at end of the vesting period for the Series E-2 and Series F Preferred Stock warrants.
For the Series G true-up, the conversion price of the Series G Convertible Preferred Stock was reduced to a number equal to the Series G Preferred Stock original issuance price, divided by the quotient obtained by dividing the Series G true-up amount by the total number of Series G Preferred Stock issued as of the Series G closing date. The Series G true-up amount means the aggregate number of shares of Series G Preferred Stock that would have been issued to the purchasers of the Series G Preferred Stock on the Series G closing date, if warrants to purchase shares of Series E-2 Preferred Stock or Series F Preferred Stock that were exercisable or exercised as of the true-up time (end of vesting period) had been exercisable or exercised as of such Series G closing date.
Liquidation Rights
PMI’s convertible preferred stock has been classified as temporary equity on the condensed consolidated balance sheets. The preferred stock is not redeemable; however, in the event of a voluntary or involuntary liquidation, dissolution, change in control or winding up of PMI, holders of the convertible preferred stock may have the right to receive its liquidation preference under the terms of PMI’s certificate of incorporation.
Each holder of Series E-1, Series E-2, and Series F convertible preferred stock is entitled to receive prior and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A, Series B, Series C, Series D, Series G and Series A-1 convertible preferred stock or common stock, an amount per share for (i) each share of Series E-1 convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, (ii) each share of Series E-2 convertible preferred stock equal to the sum of two-thirds the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (iii) each share of Series F convertible preferred stock equal to the sum of two-thirds of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series E-1, Series E-2, and Series F convertible preferred stock, each holder of Series A, Series B, Series C and Series D, Series E-2, Series F, and Series G convertible preferred stock is entitled to receive, on a pari passu basis, prior to and in preference to any distribution of proceeds from a liquidation event (as defined under the certificate of incorporation) to the holders of Series A-1 convertible preferred stock or common stock, (i) an amount per share for each share of Series E-2 and Series F convertible preferred stock equal to the sum of one-third of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share, and (ii) an amount per share for each share of Series A, Series B, Series C, Series D and Series G convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, and Series G convertible preferred stock, the holders of Series A-1 convertible preferred stock are entitled to receive, prior and in preference to any distribution of proceeds to the holders of common stock, an amount per share for each such share of Series A-1 convertible preferred stock equal to the sum of the liquidation preference specified for such share and all declared but unpaid dividends, if any, on such share.
After the payment or setting aside for payment to the holders of Series A, Series B, Series C, Series D, Series E-1, Series E-2, Series F, Series G, and Series A-1 convertible preferred stock, the entire remaining proceeds legally available for distribution will be distributed pro rata to the holders of Series A convertible preferred stock and common stock in proportion to the number of shares of common stock held by them assuming the Series A convertible preferred stock has been converted into shares of common stock at the then effective conversion rate, provided that the maximum aggregate amount per share of Series A convertible preferred stock which the holders of Series A convertible preferred stock shall be entitled to receive is three times the original issue price for the Series A convertible preferred stock.
At present, the liquidation preferences are equal to $0.29 per share for the Series A convertible preferred stock, $2.00 per share for the Series A-1 convertible preferred stock, $0.60 per share for the Series B convertible preferred stock, $2.87 per share for the Series C convertible preferred stock, $6.91 per share for the Series D convertible preferred stock, $0.84 per share for the Series E-1 convertible preferred stock, $0.84 per share for the Series E-2 convertible preferred stock, $0.84 per share for the Series F convertible preferred stock and $1.34 per share for the Series G convertible preferred stock.
Voting
Each holder of shares of convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of convertible preferred stock could be converted and has voting rights and powers equal
to the voting rights and powers of the common stock. The holders of convertible preferred stock and the holders of common stock vote together as a single class (except with respect to certain matters that require separate votes or as required by law), and are entitled to notice of any stockholders’ meeting in accordance with the by-laws of PMI. 
Convertible Preferred Stock Warrant Liability
Series E-1 Warrants
In connection with the Settlement and Release Agreement dated November 17, 2016 among PMI, its wholly owned subsidiary Prosper Funding LLC (“PFL”) and Colchis, on December 16, 2016, PMI issued the First Series E-1 Warrant for 20,267,135 shares of Series E-1 convertible preferred stock. The Second Series E-1 Warrant for an additional 15,277,006 shares of Series E-1 convertible preferred stock was granted on the signing of the Consortium Purchase Agreement (as described in Note 13 of PMI’s 10-K for the year ended December 31, 2025) on February 27, 2017. On March 31, 2026, one warrant holder exercised all of the outstanding 35,544,141 shares of Series E-1 Warrants at the exercise price of $0.01 per share for total proceeds of $0.4 million. The estimated fair value of these warrants as of the date of the exercise was approximately $38.7 million, which was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock at that time.
For the three and six months ended June 30, 2026 (prior to the full exercise of the Series E-1 Warrants, as discussed above), the Company recognized $13.5 million of income from the re-measurement of the fair value of the warrants. For the three and six months ended June 30, 2025, the Company recognized $9.6 million and $0.4 million of expense, respectively, from the re-measurement of the fair value of the warrants. The income or expense resulting from the remeasurement of the fair value of the warrants is recorded in Change in Fair Value of Convertible Preferred Stock Warrants on the condensed consolidated statements of operations.
To determine the fair value of the Series E-1 Warrants, the Company first determined the value of a share of Series E-1 Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derived the business equity value (“BEV”) of the Company using a variety of valuation methods, including discounted cash flow models and market based methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determined an estimated BEV, the option pricing method (“OPM”) was used to allocate the BEV to the various classes of equity, including the preferred stock. The concluded per share value for the Series E-1 Convertible Preferred Stock was utilized as an input to the Black-Scholes option pricing model.
Series F Warrants
In connection with the Consortium Purchase Agreement on February 27, 2017, PMI issued warrants to purchase up to 177,720,706 shares of PMI's Series F convertible preferred stock at $0.01 per share. The warrants expire ten years from the date of issuance, and the following is a listing of exercises of Series F Warrants as of June 30, 2026:
•On July 30, 2025, one warrant holder exercised 51,614,124 shares of Series F Warrants for cash proceeds of $0.5 million. On the exercise date, the aggregate fair value of these warrants was approximately $73.3 million, which was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock.
•On March 19, 2026, one warrant holder exercised 41,833,904 shares of Series F Warrants for total proceeds of $0.4 million. The estimated fair value of these warrants as of the date of exercise, totaling $42.3 million, was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock.
•On May 15, 2026, one warrant holder exercised 41,833,904 shares of Series F Warrants for total proceeds of $0.4 million. The estimated fair value of these warrants as of the date of exercise, totaling $42.7 million, was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock.
•On June 15, 2026, one warrant holder exercised 41,833,904 shares of Series F Warrants for total proceeds of $0.4 million. The estimated fair value of these warrants as of the date of exercise, totaling $47.7 million, was reclassified from Convertible Preferred Stock Warrant Liability to Convertible Preferred Stock.
Following these exercises, a total of 604,868 Series F Warrants remain outstanding as of June 30, 2026. For the three months ended June 30, 2026 and 2025, Prosper recognized $5.9 million and $49.8 million of expense, respectively, from the re-measurement of the fair value of the warrants. For the six months ended June 30, 2026 and 2025, the Company recognized $44.5 million of income and $1.8 million of expense, respectively, from the re-measurement of the fair value of the warrants. The income or expense resulting from changes in the fair value of the warrant is recorded through Change in Fair Value of Convertible Preferred Stock Warrants on the condensed consolidated statements of operations.
To determine the fair value of the Series F Warrants, the Company first determines the value of a share of Series F Convertible Preferred Stock. To determine the fair value of the Convertible Preferred Stock, the Company first derives the BEV using valuation methods, including a combination of methods, as deemed appropriate under the circumstances applicable at the valuation date. Once the Company determines an estimated BEV, the OPM is used to allocate the BEV to the various classes of Prosper's equity, including its preferred stock. The concluded per share value for the Series F Convertible Preferred Stock warrants utilizes the Black-Scholes option pricing model.
The Company determined the fair value of the outstanding Series F Warrants utilizing the following assumptions as of the following dates:
June 30, 2026December 31, 2025
Volatility54.0 %57.0 %
Risk-free interest rate4.10 %3.50 %
Expected term (in years)2.502.75
Dividend yield— %— %
These assumptions were determined using the same criteria described above for the Series E-1 warrants.
Common Stock
PMI, through its Amended and Restated Certificate of Incorporation, is the sole issuer of common stock and related options, RSUs and warrants. On February 16, 2016, PMI amended and restated its Certificate of Incorporation to, among other things, effect a 5-for-1 forward stock split. On September 20, 2017, PMI further amended its Amended and Restated Certificate of Incorporation to increase the number of shares of common stock authorized for issuance. PMI has the authority to issue is 1,069,760,848 total number of shares of stock, consisting of 625,000,000 shares of common stock, at $0.01 par value per share, and 444,760,848 shares of preferred stock, also at $0.01 par value per share. On December 23, 2019, the Company repurchased 2,196,665 shares of Common Stock from an investor. As of June 30, 2026, 80,871,884 shares of common stock were issued and 79,935,949 shares of common stock were outstanding. As of December 31, 2025, 79,138,710 shares of common stock were issued and 78,202,775 shares of common stock were outstanding. Each holder of common stock is entitled to one vote for each share of common stock held.
As disclosed above, on June 30, 2026, one PMI equity investor transferred 244,130 shares of Common Stock to PGT. Those shares remain legally issued and outstanding, but are held by a consolidated VIE.
Common Stock Issued upon Exercise of Stock Options
For the six months ended June 30, 2026, PMI issued 1,229,353 shares of Common Stock upon the exercise of vested options for cash proceeds of $33 thousand.
Common Stock Issued upon Exercise of Warrants
On April 26, 2026, one warrant holder exercised 503,821 shares of Common Stock warrants via a cashless exercise. Following this exercise, no Common Stock warrants remained outstanding.