Blue Owl Capital on the New York Stock Exchange, May 20, 2021.
Source: New York Stock Exchange
shares of blue owlThe private credit company at the center of the recent turmoil over its exposure to software companies soared 10% in Thursday trading after executives disclosed huge profits tied to SpaceX.
“We made about a 10x return on that investment,” a company executive said on the first-quarter earnings call.
Blue Owl has already sold about half its position at a valuation of $1.25 trillion and continues to hold the rest, he said.
The conference call was hosted by Co-Chief Executive Officer Mark Lipschultz and Chief Financial Officer Alan Kirshenbaum. It was not immediately clear which executives spoke specifically about investing in SpaceX.
Gains from SpaceX, which is heading for what could be the biggest IPO in history later this year, could offset potential losses in other parts of Blue Owl’s portfolio if the software company defaults, executives said. This helps allay fears that modern artificial intelligence models will put some software companies out of business.
Private credit funds primarily consist of loans, but can also hold preferred and common stocks of companies. This increases the potential equity value, effectively making it a credit/equity hybrid vehicle.
“We financed the company and had the opportunity to get to know them very well and then participate in ongoing conversations about other financing opportunities and ultimately, in this case, equity investment,” Blue Owl executives said of SpaceX.
Minutes later, Blue Owl executives pointed out that while loan-to-value rates have worsened due to the software downturn, there is still “a tremendous amount of cushion left” before losses occur.
Blue Owl reported strong first-quarter results early Thursday, with fee-related revenue and assets under management increasing as capital continued to flow into the company.
The company’s stock reacted favorably to the news, but skyrocketed around 9:49 a.m. during a conference call with analysts.
