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]] 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 | [[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’ profit, and thus the [[net equity]] it held with its [[prime broker]]s. [[Archegos]] used that [[net equity]] to double down, buying 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. | ||
Now, hindsight is a wonderful thing, but really there was only one way this was ever going to turn out. | Now, hindsight is a wonderful thing, but really there was only one way this was ever going to turn out. | ||
On 22 March, | On 22 March, [[Archegos]]’ position in Viacom had a gross [[market value]] of US$5.1bn.<ref>{{credit suisse archegos report}}</ref> In a cruel irony, Viacom interpreted this to mean “market sentiment’ was 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, no one was buying. Not even Archegos could, 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]]. |