Blue Owl Capital (OBDC) Shares Plunge 2.33% as Merger Scrutiny and Regulatory Risks Weigh on Market Confidence

Blue Owl Capital (OBDC) shares fell to a two-year low on Thursday, marking a 2.33% intraday decline as the stock extended its losing streak to two consecutive sessions. The price slide reflects growing investor caution amid a confluence of regulatory uncertainties and mixed sentiment about the company’s strategic direction.

Institutional activity has highlighted divergent views on OBDC’s long-term prospects. Recent filings show firms like Fora Capital LLC and Invesco Ltd. have increased holdings, while others, including Raymond James Financial Inc., have also raised stakes. These moves underscore confidence in Blue Owl’s alternative credit expansion plans, particularly its $29 billion data center partnership with Meta, which analysts view as a potential catalyst for credibility in the sector. However, the company’s pending merger with Blue Owl Capital Corporation III (OBDE) has drawn scrutiny. Shareholders have raised concerns about incomplete disclosures in the merger’s registration statement, prompting voluntary supplemental updates and legal discussions.

Financial metrics further complicate the outlook. OBDC maintains a $0.37 quarterly dividend, supporting its appeal to income-focused investors. Yet the stock trades at a 6.25% discount to its net asset value (NAV), a common feature among business development companies but one that signals market skepticism about asset valuations. While analysts have upgraded earnings estimates, citing robust net interest income growth and a 75 bps ROE uplift target, the NAV discount persists as a drag on valuation.

Legal and regulatory risks loom large. The merger’s regulatory hurdles and potential FINRA arbitration claims from investors citing misrepresentation have created a cloud over the deal’s expected Q1 2025 closure. These uncertainties could deter new capital inflows, exacerbating volatility. Meanwhile, broader sector dynamics—such as interest rate sensitivity and economic risks—add to the challenges, as Blue Owl’s exposure to private credit and real estate makes it vulnerable to downturns and rising borrowing costs.

Market sentiment remains split. Some analysts highlight OBDC’s strategic initiatives and strong operational metrics, while others caution against the NAV discount and governance concerns. With the company navigating a complex landscape of institutional support, legal scrutiny, and sector headwinds, the path to resolving its merger and stabilizing its NAV premium will be critical in shaping investor confidence.