Template:Archegos capsule: Difference between revisions

[[File:Archegos Positions.png|250px|thumb|left|When [[variation margin]] attacks: ViacomCBS, Tencent, Baidu and Vipshop against the Dow (black)]][[Archegos]] 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 — in sizes big enough to push up their market prices. As their valuations increased, so did the [[net equity]] Archegos held with its [[prime broker]]s. Archegos used that equity to double down on the same investments, pushing the stock further up. The higher the stock went, the thinner the trading volume. [[Archegos]] became an ever-larger part of the market. On 22 March, Archegos’ [[synthetic equity swap|synthetic]] ViacomCBS position had a gross market value of USD5.1bn — more than 10% of ViacomCBS’ market capitalisation. Since Archegos was trading synthetically, ViacomCBS may not have realised it was the only buyer in town.<ref>{{credit suisse archegos report}}</ref> In any case, in a brutal cruel irony, ViacomCBS concluded that market sentiment was so strong that it should raise capital raising, and it duly announced a USD3bn share offering. There turned out to be only one buyer even interested in the offering — Archegos — and it was tapped out of fresh equity to invest. When it declined to participate, the capital raising failed and hell broke loose.