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(Reuters) – A number of big block deals on Friday, which investors said caused sharp declines in the shares of a handful of companies, were linked to investment fund Archegos Capital, a source close to the situation. on volatile trading in the next few days.
Shares of ViacomCBS and Discovery fell around 27% each on Friday, while US-listed shares of China-based Baidu and Tencent Music plunged during the week, falling 33.5% respectively. and 48.5% from Tuesday’s closing levels. Baidu was trading slightly lower in Hong Kong at the opening.
Investors and analysts on Friday cited blocks of Viacom and Discovery shares put on the market as likely exacerbating the decline in those shares. Viacom was also downgraded by Wells Fargo on Friday.
The block deals were linked to sales of stakes by Archegos, a source familiar with the situation said, confirming reports elsewhere. CNBC reported on Saturday that the pressure to sell was due to the liquidation of positions by family office Archegos Capital Management, citing a source with direct knowledge of the situation. The link with Archegos was also previously reported by IPO Edge.
A person from Archegos who answered the phone on Saturday declined to comment. Archegos was founded by Bill Hwang, who founded and ran Tiger Asia from 2001 to 2012, when he renamed it Archegos Capital and made it a family office, according to a page capture from the fund’s website. Tiger Asia was a Hong Kong-based fund looking to profit from equity betting in Asia.
Prior to starting Tiger Asia, Hwang was an equity analyst for Tiger Management according to the Archegos website. Tiger Management, led by Julian Robertson, was a very successful hedge fund, which returned money to investors and closed in 2000.
Hwang in 2012 settled the insider trading fee by the United States Securities and Exchange Commission according to a press release at the time. He and his companies at the time agreed to pay $ 44 million to settle, the statement said.
VOLATILITY PROBLEMS
Some market participants said last week’s wild moves are likely to make investors increasingly cautious.
“This is insane,” said Edward Moya, senior market analyst at OANDA. “When you consider how some of these businesses have exploded over the past few months, there will be concerns that we are in debt.”
Other market participants have said that potential outcomes will only have a limited impact in larger markets. The Nasdaq Composite and the S&P 500 both jumped more than 1% on Friday despite massive selling from Viacom and other stocks.
“These stories of liquidation do happen from time to time,” said Michael Antonelli, market strategist at Baird. “Some of the names that big blocks traded on Friday may see some near-term volatility as traders wonder if the sell is over.”
Mike O’Rourke, chief market strategist at JonesTrading, said he expected the trades “to be largely completed.”
“The major brokers have made a lot of noise marketing these blocks,” O’Rourke said. “They were aggressively dropping stocks in order to make the trades.”
O’Rourke added that blue chip brokers typically buy the leftover position, and he expected most of the names involved in block trades to “stand out significantly more” in pre-market trading.
In potentially more baffling news for investors, Japan’s Nomura Holdings Inc on Monday reported a potential loss of $ 2 billion at a U.S. subsidiary, although traders are not sure if this was related to Archegos.
INVOLVED BANKS
A number of banks participated in the block sales. A source familiar with the matter said on Saturday that Goldman Sachs Group Inc was involved in the large block trades. The Financial Times reported that Morgan Stanley sold $ 4 billion in shares early Friday, followed by an additional $ 4 billion in the afternoon.
A source familiar with the matter said Deutsche Bank was also involved in the block transactions.
Bloomberg and the Financial Times reported on Saturday that Goldman had liquidated more than $ 10 billion in shares in block deals.
An email to customers seen by Bloomberg News said Goldman sold $ 6.6 billion in shares of Baidu Inc, Tencent Music Entertainment Group and Vipshop Holdings Ltd, before the US market opened on Friday, according to the Bloomberg report on Saturday.
Subsequently, Goldman sold $ 3.9 billion in shares of ViacomCBS Inc, Discovery Inc, Farfetch Ltd, iQIYI Inc and GSX Techedu Inc, according to the report.
(Reporting by Megan Davies, Ira Iosebashvili and Kenneth Li in New York, additional reporting by Juby Babu in Bengaluru; Editing by Paul Simao and Jane Wardell)
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