Wall Street on Tuesday saw muted action but investors were still buzzing about the highly leveraged wrongway bet reportedly employed by Bill Hwang’s Archegos Capital Management, which may have saddled many banks with multibillion-dollar losses.
Using derivatives, Archegos, pronounced “Ar-chee-gos” by the company, maintained positions in stocks including ViacomCBS Inc. VIAC, -3.71%, Discovery Inc. DISCA, 1.55%, and GSX Techedu GSX, 2.85%, and was hit by margin calls as the direction of those highfliers turned against the family office.
The downturn in the stocks, with shares ViacomCBS and Discovery registering their worst downturns on record, forced the banks that lent Archegos the money to execute complex derivatives trades to ask the fund to put up more money or unwind the wagers.
Losses at Archegos have triggered the liquidation of massive stock positions in excess of $30 billion in value, referred to as block trades, the Wall Street Journal wrote. Some, however, say that Hwang’s fund’s exposures in financial markets approached $100 billion.
One Wall Street veteran, Michael Novogratz at Galaxy Digital and an ex-hedge fund manager was quoted by Bloomberg News as offering this unmitigated assessment of the Archegos losses:
“I’ve never seen anything like this —how quiet it was, how concentrated, and how fast it disappeared,” he said. “This has to be one of the single greatest losses of personal wealth in history,” said Novogratz.