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(Add information about Archegos, link to Nomura story)
March 28 (Reuters) – A number of big block deals on Friday, which investors said caused the shares of a handful of companies to fall sharply, were linked to investment fund Archegos Capital, a source said close to the situation. raising concerns about trading volatility in the coming 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 https://www.cnbc.com/2021/03/27/archegos-capital-forced-position-liquidation-contributes-to-viacom-discovery-plunge.html on Saturday that the selling pressure was due to the liquidation of positions of the 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 http://ipo-edge.com/2021/03/26/exclusive-tiger-cub-archegos-liquidation-triggers-record-crash-in-discovery-viacomcbs- sources.
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 https: //web.archive. org / web / 20210124211426 / https://www.archegoscapital.com/management of the fund’s website. Tiger Asia was a Hong Kong based fund https://www.reuters.com/article/togerasia-hedgefund/update-1-hedge-fund-tiger-asia-to-return-investor-money-idUKL4E8JE2XP20120814 which was looking to en profit from betting on securities in Asia.
Prior to starting Tiger Asia, Hwang was an equity analyst for Tiger Management according to the Archegos website https://web.archive.org/web/20210124211426/https://www.archegoscapital.com/management. Tiger Management, managed by Julian Robertson, was a very successful hedge fund, which returned money to investors and closed https://www.reuters.com/article/instant-article/idUSKCN1HC2XV in 2000.
Hwang in 2012 settled https://www.reuters.com/article/us-crime-insidertrading-tiger/tiger-cub-manager-pleads-guilty-in-insider-trading-case-idUSBRE8BB1RG20121212 of the tort charges initiated by the US Securities and Exchange Commission according to a press release https://www.sec.gov/news/press-release/2012-2012-264htm 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 transactions. 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 https://bloom.bg/3lYOrZm said Goldman sold $ 6.6 billion in shares of Baidu Inc, Tencent Music Entertainment Group and Vipshop Holdings Ltd, prior to the ‘US market opened on Friday, the Bloomberg report on Saturday said.
Subsequently, Goldman sold $ 3.9 billion worth of shares in 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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