Template:Archegos capsule: Difference between revisions

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[[File:Archegos Positions.png|250px|thumb|left|When [[variation margin]] attacks: ViacomCBS, Tencent, Baidu and Vipshop against the Dow (black)]]In the months leading up to March 2021, [[Archegos|Archegos Capital Management]] took [[Synthetic equity swap|synthetic]] positions [[Margin loan|on margin]] in on four comparatively [[Illiquidity|illiquid]] stocks — ViacomCBS, Tencent Music Entertainment, Baidu Inc and Vipshop. Trading across multiple [[prime broker]]s, Archegos’ total holdings were big enough to move the market. As the [[Underlier|underliers]] appreciated, so did Archegos’ [[net equity]] with its [[prime broker]]s. Archegos used its equity to double down on the same investments, pushing the stocks up yet ''further''. The higher they went, the thinner their trading volume, and the more of the market Archegos represented.  
[[File:Archegos Positions.png|250px|thumb|left|When [[variation margin]] attacks: ViacomCBS, Tencent, Baidu and Vipshop against the Dow (black)]]In the months leading up to March 2021, [[Archegos|Archegos Capital Management]] took [[Synthetic equity swap|synthetic]] positions [[Margin loan|on margin]] on a handful of comparatively [[Illiquidity|illiquid]] stocks — ViacomCBS, Tencent Music, Baidu and Vipshop — in sizes that, across multiple [[prime broker]]s, were big enough to move the market sharply up. As the stocks appreciated, so did Archegos’ [[net equity]] with its [[prime broker]]s. Archegos used that [[net equity]] to double down on the same stocks, pushing them up yet ''further''. The higher they went, the thinner their trading volume, and the more of the market Archegos represented.  


On 22 March, Archegos’ position in Viacom had a gross market value of USD5.1bn.<ref>{{credit suisse archegos report}}</ref> In a cruel irony, Viacom concluded that market sentiment was so strong that it should take the opportunity to raise capital.<ref>As it was [[Synthetic equity swap|synthetic]], Viacom may not have realised Archegos was the only buyer in town: if it had, it may never have tried to raise capital in the first place.</ref> Alas, not even Archegos was interested in its USD3bn share offering at that price since it was tapped out of equity with its prime brokers.   
Now, hindsight is a wonderful thing, but really there was only one way this was ever going to turn out.
 
On 22 March, Archegos’ position in Viacom had a gross [[market value]] of USD5.1bn.<ref>{{credit suisse archegos report}}</ref> In a cruel irony, Viacom interpreted this “market sentiment’ as so strong that it should take the opportunity to raise capital.<ref>As it was a [[Synthetic equity swap|synthetic]] position, Viacom may not have realised Archegos was the only buyer in town: if it had, it may never have tried to raise capital in the first place.</ref> Alas, not even Archegos was interested, since it was tapped out of equity with its [[prime broker]]s.   


Viacom’s capital raising therefore failed and [[Archegos|all hell broke loose]].
Viacom’s capital raising therefore failed and [[Archegos|all hell broke loose]].
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