Blue Owl Short Bets Surge Amid Stock Plunge

Investors have significantly increased their short positions in Blue Owl Capital Inc., anticipating further stock depreciation even after a nearly one-third value loss this year. This week, the percentage of Blue Owl's free float held short reached an unprecedented 14.65%. Data from S&P Global Market Intelligence indicated short interest at 17.9% of the free float recently. EquiLend Data & Analytics reported Blue Owl shares were the most borrowed US stocks on Wednesday, signaling robust bearish sentiment. "We're seeing a clear pickup in borrow demand for Blue Owl in recent weeks," stated Nancy Allen, EquiLend's head of data and analytics solutions. Shares borrowed have increased by 46% month-over-month, with financing rates up 266%, highlighting a substantial rise in borrowing costs. Despite these bearish signals, Blue Owl shares saw a modest rise of 2.6% on Wednesday amidst a broader market advance. Executives have previously cited low default rates in private debt funds and a stable credit environment, but the stock experienced its steepest monthly decline in February. Worries about artificial intelligence spending, its disruptive potential, and general lending standards have impacted Blue Owl and other private markets firms. The company also faced scrutiny over a withdrawn plan to merge private-credit funds and a recent halt in quarterly redemptions for one fund, which has since been addressed by asset sales to accelerate investor returns. Financing rates for shorting Blue Owl have surpassed 200 basis points annually due to sustained demand, making it economically viable for investors to bet on further declines.