Blue Owl, a private credit firm, saw its shares surge by 10% on Thursday following the disclosure of significant gains from its investment in SpaceX during the company's first-quarter earnings call [1]. An executive stated, "We made about 10 times our money on that investment," highlighting the substantial return Blue Owl achieved from SpaceX [1]. The firm has already sold approximately half of its SpaceX position at a $1.25 trillion valuation and continues to hold the remainder [1]. The announcement was made during a call hosted by Marc Lipschultz, co-chief executive officer, and Alan Kirshenbaum, chief financial officer, though it was not specified which executive made the SpaceX remarks [1].
The gains from SpaceX are seen as a potential offset to possible losses in Blue Owl's portfolio, particularly from software companies that may be at risk due to the latest artificial intelligence models, which could force some out of business [1]. Blue Owl's private credit funds, while primarily composed of loans, also include preferred and common shares, allowing for equity upside and positioning the funds as hybrid credit-equity vehicles [1]. The executive explained that Blue Owl initially made a loan to SpaceX, which led to further financing discussions and ultimately an equity investment [1].
Blue Owl reported solid first-quarter results, with both fee-related earnings and assets under management increasing as the firm continued to attract inflows [1]. The company expects to maintain a fee-related earnings margin of approximately 58.5% for the year, indicating that it retains more than half of its management fee revenue as profit, even in a "softer environment" for the industry [1]. Management also noted that, despite deteriorating loan-to-value rates amid the software sector slump, there remains a "tremendous amount of remaining cushion" before any losses are realized [1].
The positive market reaction was evident as Blue Owl shares jumped sharply at around 9:49 a.m. ET during the analyst conference call, following the release of the earnings report [1].
CONCLUSION
Blue Owl's announcement of a 10X return on its SpaceX investment drove a 10% surge in its share price, alleviating concerns about potential losses in its software portfolio. The firm's strong first-quarter results and robust fee-related earnings margin further reinforced positive market sentiment.