PayPal's Contrarian Bet Collides with Legal Reckoning

Michael Burry builds a 3.5% stake in PayPal, forecasting strong returns as the company faces securities lawsuits and restructures its crypto division.

A surprising vote of confidence from a famed investor is cutting through the cloud of litigation hanging over PayPal. Michael Burry, known for his "Big Short" bet against the housing market, has built a roughly 3.5 percent stake in the payments giant, calling it his favorite pick in the software and payments sector. He attributes the sector's recent slump to technical credit market effects, not fundamental flaws, and forecasts long-term annual returns exceeding 15 percent. This bullish stance arrives just as a critical legal deadline passes, framing a stark contrast between outsider optimism and internal turmoil.

The source of that turmoil traces back to a single disastrous day. On February 3, 2026, PayPal's stock cratered by more than 20 percent following weak quarterly results, operational issues in its core business, and the sudden departure of CEO Alex Chriss. That event now forms the core of multiple securities class-action lawsuits. The deadline for investors to register as lead plaintiffs in these actions passed on April 20, 2026, moving the cases into their next phase. Law firms including Faruqi & Faruqi and Labaton Keller Sucharow, acting for the Norfolk County Retirement System, allege PayPal misled investors about growth prospects in its branded-checkout business between February 2024 and February 2026. The suits claim management painted a picture of being on track while internal implementation problems undermined growth targets, arguing goals set for 2027 under the former CEO were unattainable. Such litigation typically takes two to four years to reach a final settlement.

Operationally, the company is leaning on a massive share repurchase program to provide stability. The $6 billion buyback initiative, representing about 14 percent of the current market capitalization, serves as a key support for the share price amid modest growth expectations. Analysts project revenue will increase by just under three percent for 2026. Alongside this, PayPal is aggressively restructuring its crypto division. As of April 20, 2026, crypto services now operate under the newly formed PayPal Digital, Inc., a New York-licensed trust company also doing business as Venmo Digital. Existing users do not need to take any action.

The crypto segment shows tangible progress. PayPal's proprietary stablecoin, PYUSD, has been launched in 70 markets. Its circulating supply recently hit a record of approximately $4.3 billion, with a market capitalization of $4.11 billion. Offering a 3.7 percent yield and integrated into 13 blockchain networks, PYUSD is central to the company's push into decentralized finance.

Market activity around the stock is intensifying beyond Burry's move. Analysts at Gordon Haskett have noted unusual trading activity at broker SG Americas, a firm often used by activist investors for swap transactions to build anonymous positions. Following the unexpected CEO change, PayPal appears to be attracting takeover speculation. The share price has responded, climbing over 13 percent on a monthly basis to trade around 43 euros, reclaiming ground above the 50-day moving average of 38.42 euros. Despite this recovery from a February low of 32.93 euros, the stock remains down roughly 20 percent year-to-date.

Wall Street sentiment remains cautious, with analysts largely maintaining a "Hold" rating and an average price target near $48. The passing of the legal deadline removes one immediate uncertainty. For PayPal, the path forward involves managing legal liabilities while proving its operational restructuring and crypto expansion can reignite growth. A sustained break above the 200-day line at 51.23 euros would signal a stronger recovery, but for now, the company navigates a landscape defined equally by a prominent bet and a barrage of lawsuits.