Key Takeaways
- • Blue Owl shares jumped about 10% in Thursday trading after executives disclosed sizable gains tied to SpaceX on the firm's first-quarter earnings call.
- • An executive said the firm "made about 10 times our money" on its SpaceX investment, and Blue Owl has already sold roughly half its position at a $1.25 trillion valuation.
- • Blue Owl expects to maintain a roughly 58.5% fee-related earnings margin this year despite a "softer environment" for the industry.
- • Management said loan-to-value rates have deteriorated amid the software slump but that there is a "tremendous amount of remaining cushion" before losses are seen.
Summary
Shares of Blue Owl, the private credit firm at the center of recent investor concern over its exposure to software companies, rose 10% in trading Thursday after executives disclosed substantial gains from SpaceX, according to CNBC. The share price jumped sharply around 9:49 a.m. ET during the first-quarter earnings call with analysts, after the firm had already reported solid first-quarter results in which fee-related earnings and assets under management rose as the firm continued to attract inflows.
On the call, an executive said, "We made about 10 times our money on that investment," and noted that Blue Owl has already sold roughly half its position at a $1.25 trillion valuation while retaining the remainder. The call was hosted by Marc Lipschultz, co-chief executive officer, and Alan Kirshenbaum, chief financial officer, though CNBC reported it was not immediately clear which executive spoke specifically about the SpaceX investment. The SpaceX stake was originally a loan. The executive described the transition: "We made a loan to the company, and had the privilege of getting to know them very well and then participating in ongoing conversations about other financing opportunities, and ultimately, in this case, an equity investment." SpaceX is headed toward what may be the largest IPO in history later this year.
The gains could offset potential losses elsewhere in Blue Owl's portfolio if software companies default, the executive said, which helps address concerns that the latest artificial intelligence models may force some software companies out of business. Private credit funds are composed mostly of loans but can also hold preferred and common shares, giving them potential equity upside and effectively making them hybrid credit-equity vehicles.
Blue Owl also said it expects to maintain a roughly 58.5% fee-related earnings margin this year, meaning it keeps more than half of its management fee revenue as profit, even under a continued "softer environment" for the industry. Management acknowledged that loan-to-value rates have deteriorated amid the software slump but said there is a "tremendous amount of remaining cushion" before losses are seen.
On the call, an executive said, "We made about 10 times our money on that investment," and noted that Blue Owl has already sold roughly half its position at a $1.25 trillion valuation while retaining the remainder. The call was hosted by Marc Lipschultz, co-chief executive officer, and Alan Kirshenbaum, chief financial officer, though CNBC reported it was not immediately clear which executive spoke specifically about the SpaceX investment. The SpaceX stake was originally a loan. The executive described the transition: "We made a loan to the company, and had the privilege of getting to know them very well and then participating in ongoing conversations about other financing opportunities, and ultimately, in this case, an equity investment." SpaceX is headed toward what may be the largest IPO in history later this year.
The gains could offset potential losses elsewhere in Blue Owl's portfolio if software companies default, the executive said, which helps address concerns that the latest artificial intelligence models may force some software companies out of business. Private credit funds are composed mostly of loans but can also hold preferred and common shares, giving them potential equity upside and effectively making them hybrid credit-equity vehicles.
Blue Owl also said it expects to maintain a roughly 58.5% fee-related earnings margin this year, meaning it keeps more than half of its management fee revenue as profit, even under a continued "softer environment" for the industry. Management acknowledged that loan-to-value rates have deteriorated amid the software slump but said there is a "tremendous amount of remaining cushion" before losses are seen.
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