Blue Owl shares hit record lows at the center of the private credit storm.

Blue Owl shares hit record lows at the center of the private credit storm.

Driven by growing concerns in the market over the health of the $1.8 trillion private credit market, Blue Owl—the epicenter of the private credit storm—saw its stock drop 1.4% on Monday, closing at $8.45, a record low and below the previous lowest point set at the end of 2022.

Previously, last Thursday, Blue Owl announced it would restrict redemptions from two of its private credit funds following a surge in redemption requests, causing its stock to hit an intraday historic low.

Blue Owl went public in May 2021 through a special purpose acquisition company (SPAC), resulting from the merger of Owl Rock Capital Group and Dyal Capital Partners.

Currently, a type of private credit fund aimed at retail investors—Business Development Companies (BDCs)—are facing a wave of redemption requests, due to increasing market anxiety over their lending methods and exposure to companies likely to be impacted by artificial intelligence.

Owing to its high exposure in software companies that may be replaced by artificial intelligence, Blue Owl’s stock has become a popular bet for those wagering on continued deterioration in private credit.

Blue Owl just experienced its most severe quarterly decline ever, and has fallen for eight consecutive months. In early March, short bets against its stock reached a historic high.

Blue Owl owns multiple BDCs, which are one of the main channels for individual investors to participate in private credit. One of its technology-focused funds saw redemption requests surpass 15% last quarter. During this period, the company planned to merge two BDCs, but had to cancel due to concerns that some investors would suffer significant losses.

In February this year, Blue Owl stated it had sold $1.4 billion in loans to address investor redemption needs. In March, company executives defended this sale during a conference call with investors. Co-President Craig Packer said there were “no hidden terms or discounts” in the transaction.

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