Key Takeaways
- Michael Burry established a roughly 3.5% stake in PayPal and intends to acquire Salesforce and MSCI shares.
- According to Burry, the software sector’s downturn stems from technical market dynamics rather than fundamental weaknesses.
- He points to a “reflexive positive feedback loop” linking declining stock prices with banking debt stress affecting software companies.
- PayPal shares increased 2.5% on Friday, fueled partially by expectations of activist investor involvement.
- SG Americas appears to be functioning as a swap broker for activist funds, with PayPal identified as a potential target.
Michael Burry has returned to software equities — and he’s making his moves public.
The founder of Scion Asset Management shared a detailed Substack post on Wednesday explaining his rationale for accumulating several undervalued software stocks. His thesis centers on a simple premise: the recent price collapse reflects technical market forces rather than deteriorating business fundamentals.
Burry outlined a “reflexive positive feedback loop” mechanism whereby declining share prices triggered distress in banking debt connected to software enterprises, which subsequently accelerated further price declines. He anticipates this pattern 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 significant new holding he revealed is PayPal (PYPL), where he initiated approximately a 3.5% position. His existing portfolio includes stakes in Fiserv (FISV), Adobe (ADBE), Autodesk (ADSK), and Veeva Systems (VEEV). He indicated plans to purchase Salesforce (CRM) and MSCI (MSCI) shares on Thursday.
A common denominator across these selections: none depend on private credit financing. This distinction carries weight given that retail investors have been withdrawing capital from private credit funds over recent months, with many of these loans extended to software enterprises, generating the technical headwinds Burry is positioning against.
Burry also recognized that certain software businesses face legitimate disruption from large language models. However, he excludes his chosen companies from that category. He stated he has “just about finished analyzing” his selections “forensically, competitively, and fundamentally.”
Activist Interest Boosts PayPal Shares
PayPal received an additional catalyst on Friday, advancing approximately 2.5%, with some momentum attributed to renewed activist investor speculation.
Gordon Hackett analyst Don Bilson identified that SG Americas — Societe Generale’s brokerage division — may be serving as a swap broker for activist investors, based on examination of SG’s 13F regulatory filing. Bilson indicated PayPal could be attracting activist attention.
This isn’t the company’s first encounter with such speculation. In February, PayPal appointed a new CEO following underwhelming earnings results and forward guidance. That same month, media reports emerged suggesting the company had garnered interest from prospective acquirers.
Additional companies Bilson identified as potential activist targets from SG’s disclosure include VICI Properties (VICI), Host Hotels (HST), and GitLab (GTLB). VICI advanced 0.8% Friday, Host Hotels appreciated 2.3%, and GitLab remained unchanged.
Burry’s Substack announcement served as the principal catalyst for most software names he discussed, with several experiencing upward price movement following the disclosure.
PayPal’s convergence of Burry’s new stake announcement and activist speculation positioned it among the most actively traded names in the sector on Friday. The shares remain substantially below their historical peak, which probably constitutes part of the attraction for a value-focused investor like Burry.
As of Thursday, Burry disclosed intentions to expand his Salesforce and MSCI holdings — although he hasn’t verified whether these transactions were completed.
