When variation margin attacks: Difference between revisions

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 {{quote|''Shares of ViacomCBS closed down 9% Tuesday, a day after the company said it would raise $3 billion from stock offerings. ViacomCBS said it will sell $2 billion in class B common shares and $1 billion in Series A mandatory convertible preferred shares. The stock offerings come just a few weeks after the company launched its Paramount+ streaming service, and the offerings will help the company bulk up its content. ViacomCBS said it would use the funds to power “investments in streaming,” among other general corporate purposes.''
 :—CNBC, March 23, 2021}}
-[[File:Archegos Positions.png|300px|thumb|left|When [[variation margin]] attacks]]{{archegos capsule}}[[Archegos]] is the story of a fund which took synthetic positions [[Margin loan|on margin]] in on four comparatively [[Illiquidity|illiquid]] stocks — ViacomCBS, Tencent Music Entertainment, Baidu Inc and Vipshop — in sufficient size as to push up their market prices. As their valuations increased, so did Archegos’ [[net equity]] with its [[prime broker]]s. Archegos systematically used the value of that equity to double down on its investments, pushing the stock further up. The further up the stock went the fewer participants were active, meaning total trading volume dropped, off, and [[Archegos]] became ever larger part of the market. By 22 March, Archegos’ Viacome position had a gross market value of USD5.1bn. Since Archegos was trading synthetically, it may not have been apparent that to ViacomCBS that there was only one buyer in town.<ref>{{credit suisse archegos report}} Not understanding this, in a cruel irony ViacomCBS concluded that market sentiment would support a capital raising, duly launched a USD3bn share offering, which there was only one potential buyer — Archegos — and it was tapped out of fresh equity. The capital raising failed, and all hell broke loose.
+{{archegos capsule}}
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