Template:Archegos capsule
In the months leading up to March 2021, Archegos Capital Management took synthetic positions on margin in on four comparatively illiquid stocks — ViacomCBS, Tencent Music Entertainment, Baidu Inc and Vipshop. Trading across multiple prime brokers, Archegos’ total holdings were big enough to move the market. As the underliers appreciated, so did Archegos’ net equity with its prime brokers. 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.
On 22 March, Archegos’ Viacom position had a gross market value of USD5.1bn.[1] as it was synthetic, Viacom may not have realised Archegos was the only buyer in town. In a cruel irony, Viacom concluded that market sentiment was so strong that it should take the opportunity to raise capital. Alas, only Archegos was even valugely interested in its USD3bn share offering at that price — and Archegos was tapped out of fresh equity with its brokers, so it could not participate.
The capital raising failed and hell broke loose.