Blue Owl reveals profit on SpaceX investment, shares rise. Is the fund saved?

Shares of private credit management company Blue Owl, from which investors began withdrawing money this year over fears of a "software apocalypse," jumped 10% in trading on Thursday, April 30. Blue Owl management disclosed significant profits from its investment in Elon Musk's space startup SpaceX. At the same time, the company reported that the inflow of investments into its funds in the first quarter was one of the most sluggish in its history.

In trading on Thursday quotations of securities of the management company in the field of investments Blue Owl Capital jumped almost 10% to $ 9.8. However, since the beginning of the year they still remain in the negative by 35%.

Investors took a positive view of the announcement of the income that the company received from the investment in SpaceX. "We made about ten times what we invested on that investment," a top Blue Owl executive said during a conference call on the first quarter results, CNBC reported. Blue Owl has already sold about half of its position at SpaceX's $1.25 trillion valuation and continues to hold the remainder. The call involved Blue Owl co-CEO Mark Lipschultz and CFO Alan Kirschenbaum: it is unclear who exactly commented on the investment in SpaceX, the channel noted.

"We made a loan to the company and had the privilege of getting to know it very well and then participating in further discussions about other financing opportunities - and ultimately, in this case, about an equity investment," added BlueOwl's top executive.

Profits from SpaceX, which plans to reach a $2 trillion valuation at its IPO in 2026, could offset potential losses in other parts of Blue Owl's portfolio if the company's software developers, which it has been lending to, default, Blue Owl executives said. This helps alleviate investor fears that a "software apocalypse" would hit the management company's profitability, CNBC explained. Previously, investors began withdrawing money from several of Blue Owl's core funds related to lending to software developers, which led to restrictions from the company. This, in turn, heightened fears of a bubble forming in the private lending market.

While private credit funds are mostly made up of loans, they can also hold preferred and common stock in companies. This gives them potential growth through equity holdings and effectively turns them into hybrid credit/equity instruments, CNBC writes.

The company said it expects to maintain a commission-related profit margin of about 58.5% this year. That means Blue Owl retains more than half of its management fee revenue as profit, even in the face of a challenging industry environment.

While some metrics have deteriorated amid the downturn in the software sector, there is still a "huge margin of safety" before losses occur, Blue Owl executives noted on a conference call Thursday. The company has lowered its valuation of software developers in its portfolio, Lipschultz and Kirschenbaum said.

Blue Owl also said investors poured $9 billion into its funds in the first quarter, the weakest amount of capital raised in a year, as fatigue with private credit reduced interest in some of the company's key strategies, the Financial Times said. However, the company also noted that capital raised in the first quarter was more than a third higher than a year earlier. Blue Owl's assets under management rose to $315 billion at the end of March, falling slightly short of Wall Street forecasts, the publication noted.

This article was AI-translated and verified by a human editor