Lawsuit accuses Blue Owl of inflating assets in $4.3B merger

A class action accuses the largest US software-focused business development company of inflating asset values ahead of a $4.3 billion merger.

A shareholder has filed a securities class action against Blue Owl Technology Finance Corp., alleging the company's offering materials were packed with "untrue statements of material fact" and "omitted material facts" when it absorbed its sister fund in a March 2025 merger worth approximately $4.278 billion.

The complaint, filed October 5, 2026 in New York state court and removed to the US District Court for the Southern District of New York on November 3, 2026, also names Blue Owl Capital Inc. and several current and former officers and directors as defendants. The claims fall under the Securities Act of 1933 and do not allege fraud - they target the accuracy of the paperwork used to sell the deal to shareholders.

Blue Owl Technology Finance Corp. is a business development company - a type of investment fund that lends directly to mid-sized businesses - focused on US software and technology companies. It merged with Blue Owl Technology Finance Corp. II on March 24, 2025. Former shareholders of the acquired fund received 0.9113 shares of the surviving company for each share they held, the complaint states - over 250 million new shares in total.

At the time, neither fund traded on a public exchange, the complaint notes. The surviving company listed on the New York Stock Exchange under the ticker "OTF" on June 12, 2025.

What the lawsuit says went wrong with the numbers

The central allegation is that the company's method for pricing its investment portfolio broke the rules.

Under ASC 820 - the US accounting standard that tells companies how to measure the value of their assets - a company must estimate what a reasonable buyer would pay, taking into account everything that buyer would consider. As of December 31, 2024, Blue Owl Technology Finance Corp. held investments valued at approximately $6.4 billion on a standalone basis, mostly loans and equity stakes tied to software companies, the complaint states. Roughly 94.4% of those assets were classified as "Level 3" as of December 31, 2023, according to the filing - meaning their value was estimated internally rather than set by observable market prices.

The complaint alleges the company ignored two forces that were eating into the real value of those assets.

The first is interest rates. Between March 2022 and July 2023, the benchmark federal interest rate climbed from 0.08% to 5.33% - a jump of more than five percentage points, the filing states. Because approximately 95.9% of the company's loans carried floating rates as of September 30, 2024, this spike drove up borrowing costs for its "highly leveraged" portfolio companies and increased their risk of default, the complaint alleges. Yet the company "continued to carry numerous software loans at or near par" - at face value - instead of marking them down to reflect what the market would actually demand, according to the filing.

The second is AI disruption. By 2024, the complaint alleges, AI-powered competitors were flooding the software market, AI coding tools were slashing startup development costs, and enterprise customers were using AI agents to cut the number of software subscriptions they needed. The "highly recurring and predictable revenue" the offering materials attributed to portfolio companies was under threat, the filing claims, but the company did not factor these shifts into its valuations.

Two loans that tell the story

The complaint singles out two investments to show what it says went wrong.

One is a loan to Acquia Inc., a mid-sized software-as-a-service company acquired through a roughly $1 billion leveraged buyout in 2019. Despite what the complaint describes as rising borrower costs, increased competition, and "AI-related pressure on mid-sized SaaS companies," the company carried the loan at exactly face value across multiple reporting periods - $152,102,000 as of December 31, 2021 and December 31, 2022, and $176,509,000 as of December 31, 2023 and September 30, 2024, the filing states.

The other is a loan to Pluralsight Inc., an IT learning platform also backed by a leveraged buyout. The complaint describes a rapid collapse: from approximately $154.3 million (about 96.8% of face value) as of December 31, 2023, to approximately $133.2 million by March 31, 2024, to approximately $75 million by June 30, 2024. By August 2024, the complaint states, the borrower could no longer service roughly $1.5 billion in debt and went through a restructuring that "eliminated" its private equity sponsor's stake and cut its debt by approximately $1.3 billion.

What the complaint says was left out

The complaint also alleges the offering materials fell short of SEC disclosure rules. Under the regulations that govern what companies must tell investors about known risks and trends, the filing claims the company was required to flag the impact of rising interest rates and AI disruption on its portfolio - and did not. The complaint calls the risk factor disclosures "wholly inadequate" and "generalized and vague."

There is also the matter of who was setting the prices. The company's external advisor - an affiliate of Blue Owl Capital Inc. - was the entity responsible for determining what the portfolio was worth, the filing states, while also earning management fees tied to the value of those same assets. The complaint alleges this created a structural conflict of interest that the offering materials did not adequately disclose.

Since listing on June 12, 2025, shares have traded as low as $9.57, the complaint states - roughly 44% below the reported per-share net asset value of $17.06 at the time of the merger and approximately 44.2% below the opening share price of $17.15.

The complaint seeks damages on behalf of all former Blue Owl Technology Finance Corp. II shareholders who received shares in the merger.

These allegations have not been tested, and no court has ruled on the merits.