Blue Owl Capital (NYSE: OWL) saw its stock price tumble 3.4% to $8.91 on Tuesday, bringing it close to its 52-week low of $7.95. The decline came on heavy trading volume, with approximately 39 million shares changing hands—68% above the 23.25 million average. The stock remains about 58% below its 52-week high of $21.08.
The sell-off was triggered by a new filing from Blue Owl Credit Income Corp., a business development company (BDC) managed by Blue Owl. The filing, submitted to the SEC on June 22, revealed a net asset value (NAV) of $19.4 billion as of May 31, along with available liquidity of $11.6 billion, including cash, liquid assets, and undrawn debt. The BDC also reported positive year-to-date returns, with Class I shares gaining 0.8% in May and 1.8% for the year.
Despite these seemingly positive metrics, the market remains focused on headwinds. Blue Owl's first-quarter report showed fee-paying assets under management in its Credit platform fell to $98.85 billion as of March 31, down from $99.49 billion at the start of the quarter. The decline was driven by $1.2 billion in redemptions from non-traded BDCs, partially offset by inflows. This trend has raised concerns about the sustainability of fee revenue, a key driver of the company's earnings.
Blue Owl's dividend yield stands at approximately 10.3%, based on a quarterly dividend of $0.23 per Class A share. While this high yield may attract income-seeking investors, it can also signal underlying risks, such as pressure on earnings or the need to maintain capital. The company's exposure to software and services, which accounted for 13.9% of debt investment par value in the BDC's portfolio as of May 31, adds another layer of risk, especially if economic conditions weaken.
The broader private equity sector also faced headwinds, with Blackstone falling 2.6%, Apollo Global Management dropping 3.4%, and KKR declining 3.6%. Blue Owl's decline was in line with its peers, though its high dividend yield and proximity to a 52-week low drew additional attention.
In their first-quarter earnings call, Blue Owl co-CEOs Doug Ostrover and Marc Lipschultz highlighted the company's "durable capital base" and the market's preference for managers with "patient capital and longer duration." However, the stock's recent performance suggests investors are looking for more concrete evidence that fee-paying assets can stabilize and that redemption pressures will ease.
Looking ahead, key risks include potential weakness in software borrowers, continued redemptions from retail clients, and the possibility that Blue Owl may need to increase dividend payouts to retain capital. The preliminary numbers in the June 22 filing have not been audited, reviewed, or compiled by independent accountants, adding a note of caution.
