Episode summary
Why Private Equity's Software Bet Is Going to Zero | The Weekly Wrap
The Real Eisman Playbook
· · 25 min · Hosts: Steve Eisman
Summary
Steve Eisman says the 10-year Treasury yield near 5.3% and rising oil prices are making markets feel fragile, with the week’s geopolitical backdrop feeding fears that something may break. He also argues that FICO’s sharp selloff reflected a real structural hit: the FHFA’s move to combine FICO and VantageScore grids, plus Rocket Mortgage’s switch to VantageScore, could accelerate the loss of FICO’s mortgage monopoly.
The deeper section of the episode is a warning on private equity’s heavy exposure to software, especially SaaS buyouts that were financed in a low-rate era with substantial leverage. Steve Eisman says many of these businesses now face weaker valuations because AI is slowing growth, limiting pricing power, and in some cases making their software easier to replace. He highlights several large deals where debt funded roughly 24% to 64% of the purchase price and says that, on average, software buyouts were financed with about 50% debt.
His core conclusion is that refinancing in 2027 could be brutal: if a company’s value has already fallen by about half, the equity can be wiped out even if operations are still intact. He thinks the problem is big enough to damage private equity’s reputation and leave many investors with worthless positions, though not large enough to sink the broader economy.
Key takeaways
- Steve Eisman says FICO’s monopoly is effectively breaking after the FHFA changed the scoring grids and Rocket Mortgage moved toward VantageScore.
- He argues private equity is overexposed to software buyouts that were levered up in a low-rate era and are now vulnerable to falling valuations.
- Steve Eisman says the SaaS apocalypse has morphed from “AI will wipe out software” into slower growth and lower pricing power for many software firms.
- He expects the 2027 refinancing wall could force private equity to inject fresh equity or walk away, leaving private credit with the assets.
- He says the problem may not topple the economy, but it could “seriously damage” the reputation of private equity and wipe out many investments.
Notable quotes
“I think these software investments are largely dead money, meaning investors are never going to see any return”
“The days of easy money are over. Private equity is overexposed to software companies”
“The stock was down over 25% on Tuesday and is down over 60% year to date”
“The debt does not go down in value until after the equity is reduced to zero”
“I don't think this private equity software problem is big enough to sink the economy”
How the episode opens
The 10-year is at 5.3%. It hasn't been here since around 2002. It feels like we are getting closer to something breaking.
FICO had a very bad week. FICO's stock price was down over 25%. This change probably puts Vantage Score at a competitive advantage over FICO.
The SAS apocalypse story has not gone away. It has just morphed. And I think these software investments are largely dead money, meaning investors are never going to see any return.
The days of easy money are over. Private equity is overexposed to software companies. Soon some number of investors who piled into private equity deals offering a great potential return will find their investments are worthless.
Here is the problem. Hi, this is Steve Eisman and welcome to the weekly rap. This is for the week ending Friday, October 2nd, but recorded Thursday night, October 1st.
We have an exciting announcement to share. Starting this coming Monday, October 5th, we are offering early access for premium subscribers. Monday and Friday will be released early exclusively to paid Substack premium subscribers.
All Monday episodes will now be released at 12:00 p.m. Eastern Standard Time every Sunday. The Friday rack will now be released at 12:00 p.m.
Eastern Standard Time every Friday. For those of you who are not premium members, the Monday and Friday episodes will be released at the usual times, Monday at noon and Friday at 4:15. On this week's rap, we will discuss one, the war in Iran, oil prices and interest rates.
Two, more negative news for poor FICO. three, an analysis of private equity and private credit exposure to software, and four, three mails. Let's get started.
In war news, the week began with President Trump projecting an offer from Iran that drove both oil prices and interest rates higher and caused the market to decline.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private equity software buyouts
- saas valuations
- refinancing wall 2027
- oil-driven inflation
- ai regulation
Companies and tickers mentioned
- FICO
- MCO
- FICO
- Moody's
Watch the episode
Watch “Why Private Equity's Software Bet Is Going to Zero | The Weekly Wrap” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Real Eisman Playbook, this episode and its artwork belong to Steve Eisman. Octagon is not affiliated with the show; this page is an independent summary.
