Traders brace after fire sale of stocks linked to Archegos
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Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday — a fire sale that has left traders scrambling to calculate how much more it has to offload, according to people with knowledge of the matter.
The fund, which had large exposures to ViacomCBS and several Chinese technology stocks, was hit hard after shares of the US media group began to tumble on Tuesday and Wednesday.
The declines prompted a margin call from one of Archegos’ prime brokers, triggering similar demands for cash from other banks, said people familiar with the matter. Traders buying the large blocks of stock were told the share sales had been prompted by a “forced deleveraging” by a fund.
Archegos is a family office that manages the wealth of Bill Hwang, a “Tiger cub” alumnus of Julian Robertson’s legendary hedge fund Tiger Management.
The firm’s website is no longer available and the company did not return multiple requests for comment. The fund’s head trader in New York hung up the phone when contacted by the Financial Times.
New York-based Hwang previously ran the Tiger Asia hedge fund but he returned cash to investors in 2012 when he admitted wire fraud relating to Chinese bank stocks.
Hwang paid $44m in fines to settle illegal trading charges with the Securities and Exchange Commission in 2012, and in 2014 he was banned from trading in Hong Kong. He did not respond to multiple requests for comment.
The sales on Friday knocked about $33bn of value off the companies involved, including Chinese tech stocks and US media groups, as Goldman Sachs and Morgan Stanley sold blocks of shares worth $19bn at discount prices throughout the day. Other funds may also have joined in the selling, people familiar with the trades say
Archegos manages its own money and does not have outside investors but its pressing need to offload large stakes in several companies is sending ripples across stocks in Asia and elsewhere, inflicting losses on other holders of the shares.
For those other investors, the question now is whether the fire sales are over. Some traders say the pattern of recent selling, which ran for several days but reached a peak on Friday, suggests the bulk has been completed. Others think the scale of leverage that Archegos appears to have used means billions of dollars' worth of positions could still remain to be sold.
Archegos describes itself as a “purposeful community of investment industry professionals”, according to an archived version of its website.
Its name is a biblical Greek word meaning chief, leader, or prince, used in relation to Jesus. In a 2018 YouTube video, Hwang said his investments were “not all about money”, adding that “God certainly has a long-term view”.
“We love seeing in our little eyes what God is doing through investing and capitalism and how . . . it can be done better,” he said.