Owl Rock Capital (ORCC) Technical Selling From Pre-IPO Shares

The following is from the ORCC Deep Dive that was previously provided to subscribers of Premium BDC Reports along with revised target prices, dividend coverage and risk profile rankings, potential credit issues, earnings/dividend projections, quality of management, fee agreements, and my personal positions for all business development companies (“BDCs”).


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Owl Rock Capital Corporation (ORCC) Pre-IPO Share Lock-Ups

As mentioned in previous updates, there is the possibility of technical selling pressure on the stock price as pre-IPO shares start to become available in 2020 including most recently on January 14, 2020 (see below).

This was discussed on the previous earnings calls and management mentioned that they communicate with their larger shareholders frequently and expect that they will continue to support the stock.

  • The Company’s common stock began trading on the New York Stock Exchange (“NYSE”) under the symbol “ORCC” on July 18, 2019.
  • As of October 30, 2019, ORCC had 389,155,516 shares of common stock outstanding.

Following our IPO, without the prior written consent of our Board:

for 180 days, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber any shares of common stock held by such shareholder prior to the date of the IPO = January 14, 2020

for 270 days, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber two-thirds of the shares of common stock held by such shareholder prior to the date of the IPO = April 13, 2020

for 365 days, a shareholder is not permitted to transfer (whether by sale, gift, merger, by operation of law or otherwise), exchange, assign, pledge, hypothecate or otherwise dispose of or encumber one-third of the shares of common stock held by such shareholder prior to the IPO = July 17, 2020

This means that, as a result of these transfer restrictions, without the consent of our Board, a shareholder who owned 99 shares of common stock on the date of the IPO could not sell any of such shares for 180 days following the IPO; 181 days following the IPO, such shareholder could only sell up to 33 of such shares; 271 days following the IPO, such shareholder could only sell up to 66 of such shares and 366 days following the IPO, such shareholder could sell all of such shares.

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ORCC Share Repurchase Plan:

On January 14, 2020, ORCC sent a notice to its shareholders discussing its $150 million share repurchase plan to repurchase of shares below book value:

“Dear Shareholders: As required by Section 23(C)(1) of the Investment Company Act of 1940, we are reminding you that the Board of Directors of Owl Rock Capital Corporation has authorized a stock repurchase program (the “Company 10b5-1 Plan”) to acquire up to $150 million in the aggregate of ORCC’s outstanding common stock. Subject to its terms and conditions, the Company 10b5-1 Plan requires Goldman Sachs & Co. LLC, as ORCC’s agent, to repurchase shares of common stock on ORCC’s behalf when the market price per share is below the most recently reported net asset value per share (“NAV”). ORCC’s most recently reported NAV is $15.22 as of September 30, 2019. The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances. Please see ORCC’s public disclosure for additional information about the Company 10b5-1 Plan. The Company 10b5-1 Plan commenced on August 19, 2019 and will terminate upon the earliest to occur of 18-months (tolled for periods during which the Company 10b5-1 Plan is suspended), the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals $150,000,000 and the occurrence of certain other events described in the Company 10b5-1 Plan. To date, no purchases have been made under the Company 10b5-1 Plan.

On July 7, 2019, the Board approved its 10b5-1 Repurchase Plan, to acquire up to $150 million in stock at prices below NAV per share starting August 19, 2019, ending on February 19, 2021 or “as the approved $150 million repurchase amount has been fully utilized.”

“In connection with our IPO, we instituted a 10b5-1 buyback program. As a refresher, this program went into effect shortly after our IPO and is a programmatic plan. It’s not discretionary, and it’s not subject to blackout windows. The plan is administered by Goldman Sachs and starts buying a share of the average daily trading volume below NAV. The size of the plan is $150 million, and it is for an initial 18-month term. We take this buyback plan into consideration when we review our target leverage and liquidity profile. Since the program went into effect, we have not bought back any shares as our trading level has been above our net asset value and IPO price.”

Owl Rock Capital Corporation (ORCC) is the second-largest publicly traded BDC (much larger than MAIN, PSEC, GBDC, NMFC, and AINV) with investments in 96 portfolio companies valued at $8.3 billion that are mostly first-lien secured debt positions. On July 22, 2019, ORCC closed its initial public offering (“IPO”), issuing 10 million shares of its common stock at a public offering price of $15.30 per share. Net of underwriting fees and offering costs, the company received total cash proceeds of $141.3 million. ORCC is one of the few BDCs rated by all of the major credit agencies. The common stock began trading on the NYSE under the symbol “ORCC” on July 18, 2019.


This information was previously made available to subscribers of Premium BDC Reports, along with:

  • ORCC target prices and buying points
  • ORCC risk profile, potential credit issues, and overall rankings
  • ORCC dividend coverage projections and worst-case scenarios
  • Real-time changes to my personal portfolio

To be a successful BDC investor:

  • As companies report results, closely monitor dividend coverage potential and portfolio credit quality.
  • Identify BDCs that fit your risk profile.
  • Establish appropriate price targets based on relative risk and returns (mostly from regular and potential special dividends).
  • Diversify your BDC portfolio with at least five companies. There are around 50 publicly traded BDCs; please be selective.