Blue Owl stock price has been in a freefall and is lagging other top companies in the industry like Apollo, Blackstone, and Ares. OWL has plunged from the year-to-date high of $25.52 to $14.45, while its market cap has dropped from $40 billion to $22 billion today. 

Blue Owl stock is facing major headwinds

Blue Owl Capital is a company that many people have never heard of, yet it is one of the biggest players in the financial services industry. It is a top company in the private equity and private credit industries with nearly $300 billion in assets under management. 

These funds are spread across its three businesses: credit, real assets, and PGP strategic capital. Its credit business, with $152 billion in assets, provides capital to private companies. Its real assets provide investment-grade facilities to tenants, borrowers, and hyperscalers. 

The GP Strategic Capital business provides minority equity and financing solutions to private capital managers. 

Blue Owl stock price has been pummeled as it is facing several major headwinds. The most recent challenge emerged earlier this month when it unveiled a plan to merge Blue Owl Capital Corp (OBDC) with its Blue Owl Capital Corp 11, which is not publicly traded. 

In this deal, shares of the non-traded fund would have been swapped for OBDC stock. The challenge, however, is that OBDC has constantly traded below its NAV, meaning that the private fund investors would have lost money. 

Blue Owl terminated the deal, but according to Reuters, the management is considering reviving it when market conditions improve. The management has said that the merger would give investor an exit approach while reducing its costs.

OWL is facing other headwinds

Blue Owl is facing other headwinds as well. For example, most of its funds are in the private credit industry, which has come under increased pressure recently.

Just this week, Jay Clayton, the main Wall Street prosecutor, warned that he was seeing some areas of concern in the private credit sector. Precisely, there are issues concerning the real value of their portfolio companies. 

These concerns rose after the recent collapse of First Brands and Tricolor, which used off-balance sheet gimmicks before their collapse. Blue Owl was not involved in these transactions.

OWL stock has also crashed because of its exposure in the artificial intelligence industry, where it has been involved in financing some major data center projects, including the $30 billion Hyperion project in Louisiana. The fear is that the bursting of the AI bubble will negatively hurt the company.

Still, fundamentally, Blue Owl is doing well, with the most recent results showing that its revenue jumped by 21% to $721 million. Most of this revenue came from the management fees it generates from its business. However, its net income plunged by 79% in this period.

Blue Owl share price technical analysis 

OWL stock chart | Source: TradingView

The daily timeframe chart shows that the OWL stock price has been in a strong freefall in the past few months. It has plunged from the year-to-date high of $25.52 to the current $14.45.

The stock remains below the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bears remain in control for now.

Worse, there are signs that the stock has formed an inverse cup-and-handle pattern, whose lower side is at $14. This pattern is made up of a horizontal support and a rounded top. It also formed a head-and-shoulders pattern, another bearish sign.

Therefore, the most likely scenario is where the OWL stock price continues falling, potentially to the psychological level at $10.

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