Blue Owl Hit with Securities Class Action, Amplifying Governance Concerns

What happened

A class action lawsuit has been filed against Blue Owl Capital Inc. by Bronstein, Gewirtz & Grossman LLC, alleging securities fraud violations and urging investors to seek recovery by a February 2, 2026 deadline. This legal action directly echoes the governance and retail-structure issues highlighted in the DeepValue report, such as the aborted OBDC II merger and gating incidents that have fueled investor backlash. Despite Blue Owl's strong operational metrics, including 26% YoY AUM growth to $295.6B and 19% YoY fee-related earnings growth in Q3 2025, its stock trades at a discount to peers due to these persistent concerns. The lawsuit risks exacerbating negative sentiment, potentially leading to heightened regulatory scrutiny and challenges in maintaining private wealth fundraising, a critical growth channel. Investors must now confront added legal uncertainty alongside existing risks in credit performance and digital infrastructure execution.

Implication

Investors should expect increased stock volatility and potential downside pressure as the lawsuit unfolds, given the market's hypersensitivity to governance issues at Blue Owl. Legal proceedings may drain management attention and financial resources, diverting focus from key strategic bets like digital infrastructure and consumer credit expansions. Negative publicity could impair private wealth inflows, which the DeepValue report identifies as vital for fee-related earnings growth, potentially stalling AUM compounding. If the lawsuit reveals substantive fraud or misstatements, it could trigger regulatory penalties and further erosion of trust in Blue Owl's retail product structures, undermining its permanent-capital model. Consequently, this development necessitates a more cautious investment stance, with closer monitoring of legal outcomes and fundraising metrics over the next 6-12 months to gauge sustainability.

Thesis delta

The class action lawsuit validates and escalates the governance risks that underpinned the 'POTENTIAL BUY' thesis, indicating they may be more severe than previously assessed. It introduces a tangible legal overhang that could delay the anticipated re-rating toward peer multiples, even if operational fundamentals like AUM growth remain intact. Investors should recalibrate their risk-adjusted return expectations, potentially reducing positions until there is clarity on the lawsuit's resolution and its impact on Blue Owl's business momentum.