Blue Owl stock hits a record low amid private credit storm

Driven by growing concerns that the private credit market, with a size of $1.8 trillion, is increasingly showing healthy signs, Blue Owl—the center of the private credit storm—its stock fell 1.4% on Monday to $8.45, closing at a record low below its prior trough set at the end of 2022.

Earlier on Thursday last week, Blue Owl said it would limit redemptions for two of its private credit funds after a surge in redemption requests, with its share price briefly hitting a new intraday record low that day.

Blue Owl completed its IPO in May 2021 through a special purpose acquisition company (SPAC), a deal formed by the combination of Owl Rock Capital Group and Dyal Capital Partners.

At present, one category of private credit funds aimed at retail investors—business development companies (BDCs)—is facing a large wave of redemption requests, as the market becomes increasingly anxious about its lending practices and its exposure to companies that are vulnerable to being disrupted by artificial intelligence.

Because it has relatively higher exposure among software companies that could potentially be replaced by artificial intelligence, Blue Owl’s stock has become one of the hottest targets for bets that private credit will continue to deteriorate.

Blue Owl has just suffered its largest quarterly decline on record, and has been down for eight straight months. In early March, bearish bets on the stock reached an all-time high.

Blue Owl has multiple BDCs, which are one of the key channels for individual investors to participate in private credit. One tech-focused fund saw redemption requests exceed 15% in the prior quarter. During this period, the company had planned to merge two BDCs, but was forced to cancel the plan over concerns that the move could expose some investors to massive losses.

In February of this year, Blue Owl said it had sold $1.4 billion in loans to meet investors’ redemption needs. In March, company executives defended the sale in a call with investors. Co-presidents Craig Packer said the transaction “has no hidden terms or discount.”

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