Alternative asset manager Blue Owl Capital finds itself navigating turbulent waters as a controversial fund merger announcement overshadows what should have been a period of positive earnings momentum. Despite delivering solid quarterly results, the company now confronts a crisis of investor confidence that has sent its shares tumbling to fresh annual lows.
Legal Challenges Emerge
The market reaction to recent developments has been swift and severe, prompting multiple law firms to announce fraud investigations and encourage affected shareholders to come forward. Legal experts point to the nearly 6% single-day decline in Blue Owl’s stock price on Monday as directly linked to the merger details unveiled that same day.
This legal scrutiny comes despite fundamentally sound performance from the parent company. Blue Owl Capital (OWL) exceeded revenue expectations with $728 million in the third quarter, demonstrating underlying business strength. However, these positive fundamentals have been completely overshadowed by merger-related anxieties.
The Controversial Merger Structure
At the heart of the controversy lies Blue Owl’s plan to merge its non-traded business development company, Blue Owl Capital Corporation II, with its publicly-traded counterpart OBDC. The $1.8 billion fund has effectively trapped investors, who can no longer redeem their shares following Monday’s announcement. This lock-in period is expected to extend until the transaction’s anticipated completion in spring 2026.
Should investors sell immediately? Or is it worth buying Blue Owl Capital?
Further complicating matters, investors face potential losses of up to 20% when exchanging their holdings for OBDC shares. This valuation gap stems from the difference between OBDC’s current market price and the net asset value of the private fund. The revelation has not only alarmed fund investors but has also dragged down the parent company’s stock.
Mixed Analyst Sentiment Prevails
Market observers have responded with divided perspectives. While many maintain a “Moderate Buy” rating for OWL, recent price target reductions from Keefe Bruyette & Woods, Wells Fargo, and other institutions tell a more cautious story. In the most dramatic adjustment, Zacks Research downgraded the stock from “Hold” to “Strong Sell” status.
From a technical standpoint, the shares show some signs of approaching oversold territory, though with a Relative Strength Index reading of 53.1, a meaningful recovery appears distant. Since the beginning of the year, OWL has surrendered approximately 40% of its value and currently trades about 25% below its 200-day moving average.
The disappointing earnings performance of the managed OBDC platform—which reported third-quarter EPS of $0.36 versus expectations of $0.39—has further complicated the narrative. As Blue Owl works to restore market confidence, the coming weeks will prove crucial in determining whether this merger becomes a strategic success or exacerbates an ongoing credibility challenge for the financial giant.
Ad
Blue Owl Capital Stock: Buy or Sell?! New Blue Owl Capital Analysis from November 18 delivers the answer:
The latest Blue Owl Capital figures speak for themselves: Urgent action needed for Blue Owl Capital investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from November 18.
Blue Owl Capital: Buy or sell? Read more here...
