Patria Investments Limited (PAX): A Bear Case Theory

We came across a bearish thesis on Patria Investments Limited on X.com by @SnowCapResearch. In this article, we will summarize the bears’ thesis on PAX. Patria Investments Limited's share was trading at $14.57 as of February 9th. PAX’s trailing and forward P/E were 20.91 and 8.14 respectively according to Yahoo Finance.

Patria Investments Limited operates as a private market investment firm. PAX faces significant operational and financial concerns, leading the analyst to maintain a short position. The Brazilian alternative asset manager, with approximately USD 50 billion AUM, positions itself as a dominant player in Latin America, yet our investigation suggests it may be overstating performance and masking losses within its flagship private equity and infrastructure funds.

Key holdings are distressed yet marked at extreme premiums to listed peers, including a pharmaceutical distributor valued at 15x EV/EBITDA despite bonds trading near 50 cents on the dollar, and other major investments, such as a loss-making hospital chain and struggling renewables platform, marked at multiples far above market norms. Many of these positions are supported by off-balance-sheet loans and fund-level guarantees, delaying loss recognition and increasing LP exposure.

Patria appears to sustain performance fees through circular internal transactions, asset shuffling, and questionable exits, including a water desalination plant moved between its own funds. Fundraising has relied on prepayments to LPs and large anchor commitments from affiliated entities, masking weak third-party demand.

Realization multiples remain well below industry norms, and reported NAVs and IRRs may not reflect economic reality. Governance concerns are elevated, with a CFO resignation, auditor change without explanation, high employee turnover, and the exit of Blackstone’s 40% stake removing prior external validation.

The firm’s reliance on debt, deferred payments, and synthetic earnings to support AUM growth and share buybacks raises dividend sustainability risks, particularly in a high-interest Brazilian macro environment. Even without these concerns, PAX’s valuation appears stretched, with a 3.5% yield offering limited upside relative to the structural and operational risks investors face. Overall, Patria’s reported results, governance, and financial engineering present significant downside risk.

Previously, we covered a bullish thesis on BlackRock, Inc. (BLK) by Kroker Equity Research in February 2025, which highlighted the company’s diversified asset management platform, record net inflows, strategic acquisitions, and technological leadership through Aladdin®. BLK’s stock price has appreciated by approximately 8.85% since our coverage. @SnowCapResearch shares a contrarian view, emphasizing operational and governance risks at Patria Investments Limited (PAX), including distressed holdings, off-balance-sheet financing, and weak fundraising.

Patria Investments Limited is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held PAX at the end of the third quarter which was 17 in the previous quarter. While we acknowledge the risk and potential of PAX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PAX and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.