Blue Owl Capital has quietly folded its tents on a proposed merger between two nearly identical private credit funds, blaming the ever-convenient scapegoat known as “current market volatility.”
The decision spares investors in the smaller, non-traded fund from immediately swapping their holdings for shares trading at a brisk 20% off retail – a bargain usually reserved for dented cans of soup, not retirement portfolios.
Blue Owl’s stock, already auditioning for the role of Wall Street’s saddest owl in 2025 with a 30% year-to-date plunge, took the news with the grace of a toddler denied ice cream – another sharp dip earlier this week, followed by a tentative premarket shrug on Friday.
Analysts note the episode has placed private credit under an electron microscope usually reserved for celebrity tax returns, just as the industry cozies up to everyday brokerage and 401(k) accounts. Quarterly withdrawal requests from the smaller fund mysteriously doubled to $60 million last quarter, a coincidence roughly as believable as a diet starting tomorrow.
Blue Owl Capital announced Thursday it would no longer pursue merging its $1.7 billion non-traded fund into the $17.1 billion publicly traded sibling.
CEO Craig Packer, wearing both fund hats with impressive dexterity, assured CNBC the portfolios are “doing extremely well” and stressed there’s “no rush here, there’s no emergency” – soothing words that historically calm markets right after someone yells “fire.”
The merger suddenly resembled a forced Black Friday doorbuster where customers discover the “savings” come from marking everything down after marking it up first.
Investors in the private fund, many advised by financial professionals who now have some explaining to do, faced exchanging stakes at current public prices – effectively volunteering for an instant unrealized loss large enough to make even crypto holders wince.
Blue Owl’s shares promptly celebrated by dropping 7% when the Financial Times politely pointed out the emperor’s new discount.
The company, born as Owl Rock in 2016 and rebranded after what insiders describe as an intense focus group with actual owls, manages a hefty $295 billion, half in credit deals ranging from SoFi consumer loans to a $27 billion data-center romance with Meta.
Co-CEO Marc Lipschultz recently gushed about AI infrastructure as a chance for Blue Owl “to do something really special,” which now apparently includes special retreats from announced mergers.
Wall Street watchers blame timing rather than credit quality. Piper Sandler analyst Crispin Love – a name sounding suspiciously like a rom-com lead – observed the proposal collided with private credit’s sudden popularity as a punching bag.
Recent bankruptcies in subprime auto lending sent jitters rippling, though Blue Owl insists it avoided those particular potholes entirely.
JPMorgan’s Jamie Dimon vaguely questioned underwriting standards across the sector last month, prompting co-CEO Lipschultz to label the remarks “odd fear mongering” – corporate speak for “bless your heart.”
The Federal Reserve’s leisurely pace on rate cuts hasn’t helped liquidity, though lower rates would presumably make everyone more flexible, including fund assets that currently move like chilled molasses.
Blue Owl remains the most-shorted stock among peers, a distinction usually awarded to companies investors love to hate or simply love betting against.
With the merger tabled, the smaller fund resumes its tender program in January, giving investors another chance to politely decline staying for dessert.
The company vows to explore fresh alternatives, raising hopes for solutions that involve less surprise markdown and more actual merging of like-valued assets.
Private credit, now firmly “under a microscope” according to analysts, continues its march into retail channels – because nothing says “safe as houses” like an opaque boom quietly unpacking boxes in your retirement account.
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