Blue Owl, at the Center of Private Credit Storm, Hits Record Low

Driven by intensifying market concerns over the health of the $1.8 trillion private credit market, shares of Blue Owl, which is at the center of the private credit storm, fell 1.4% on Monday to close at $8.45, a record low that fell below its previous low set at the end of 2022. Earlier last Thursday, Blue Owl announced it would limit redemptions for two of its private credit funds following a surge in redemption requests, causing the stock to hit an intraday record low that day. Blue Owl went public in May 2021 through a special purpose acquisition company (SPAC) merger of Owl Rock Capital Group and Dyal Capital Partners. Currently, Business Development Companies (BDCs)—a category of private credit funds aimed at retail investors—are facing a large volume of redemption requests due to increasing market anxiety over their lending practices and their exposure to companies vulnerable to artificial intelligence disruption. Blue Owl's stock has become a particularly popular target for bets on a continued deterioration in private credit, largely due to its high exposure to software companies that could be displaced by AI. Blue Owl has just experienced its sharpest quarterly decline on record and has seen eight consecutive months of declines. In early March, bearish bets against the stock reached an all-time high. Blue Owl operates several BDCs, which serve as a key channel for individual investors to participate in private credit. One tech-focused fund saw redemption requests exceed 15% last quarter. During this period, the company was forced to cancel a planned merger of two BDCs over concerns that the move could lead to significant losses for some investors. In February, Blue Owl stated it had sold $1.4 billion in loans to meet investor redemption demands. In March, company executives defended the sale during a call with investors. Co-President Craig Packer asserted that the transaction had "no hidden terms or discounts."