Key Takeaways
- Michael Burry has established a ~3.5% stake in PayPal while planning additions to Salesforce and MSCI holdings.
- Burry attributes software stock weakness to technical market dynamics rather than deteriorating business fundamentals.
- He identifies a “reflexive positive feedback loop” linking declining valuations to pressures in bank debt exposure to software companies.
- PayPal shares advanced 2.5% on Friday, fueled partially by expectations of activist investor involvement.
- SG Americas appears to be functioning as a swap intermediary for activists, with PayPal identified as a potential focus.
Michael Burry has resumed accumulating software sector positions — and he’s making his rationale public.
The founder of Scion Asset Management took to Substack on Wednesday to explain his strategy behind purchasing several battered software companies. His thesis centers on one key premise: the recent market downturn stems from technical trading factors rather than deteriorating company fundamentals.
Burry outlined what he calls a “reflexive positive feedback loop” wherein declining stock prices triggered distress in bank lending connected to software enterprises, subsequently accelerating the price declines. According to Burry, this cycle is nearing exhaustion.
“I do not believe the technical pressures brought on by the private credit/software debt issues are big enough to affect these stocks for much longer,” Burry wrote.
Burry’s Portfolio Additions
The most substantial new holding Burry revealed is PayPal (PYPL), where he has taken approximately a 3.5% ownership position. His existing portfolio already includes stakes in Fiserv (FISV), Adobe (ADBE), Autodesk (ADSK), and Veeva Systems (VEEV). He indicated intentions to expand his positions in Salesforce (CRM) and MSCI (MSCI) beginning Thursday.
A common denominator across these selections: they maintain independence from private credit financing. This distinction carries significance as retail investors have been withdrawing capital from private credit vehicles over recent months, with substantial loan exposure concentrated in software businesses, generating the technical headwinds Burry is positioning against.
Burry also recognized that certain software enterprises face legitimate disruption from large language models. However, he excludes his chosen companies from this vulnerable category. He stated he has “just about finished analyzing” his selections “forensically, competitively, and fundamentally.”
PayPal Gains Momentum on Activist Chatter
PayPal received an additional tailwind Friday, advancing approximately 2.5%, with a portion of that movement connected to emerging activist investor speculation.
Gordon Hackett analyst Don Bilson highlighted that SG Americas — Societe Generale’s brokerage division — appears to be serving as a swap intermediary for activist funds, based on examination of SG’s 13F disclosure. Bilson identified PayPal as a potential activist target.
This isn’t the company’s first encounter with such attention. PayPal replaced its chief executive in February after delivering underwhelming earnings and forward guidance. During that same period, media reports indicated the company had garnered interest from prospective acquirers.
Additional companies Bilson identified as prospective activist targets from SG’s filing encompass VICI Properties (VICI), Host Hotels (HST), and GitLab (GTLB). VICI increased 0.8% Friday, Host Hotels advanced 2.3%, and GitLab remained unchanged.
Burry’s Substack disclosure served as the principal catalyst for most software stocks he mentioned, with multiple names posting gains following the announcement.
PayPal’s convergence of Burry’s disclosed position alongside activist speculation positioned it among the session’s most actively discussed names Friday. The stock remains significantly below its historical peaks, presumably contributing to its attractiveness for a value-focused investor like Burry.
As of Thursday, Burry communicated plans to augment his Salesforce and MSCI holdings — though he hasn’t verified completion of those transactions.
