Investment firm Archegos Capital Management, led by businessman Bill Hwang, is now at the center of one of the biggest scandals in the international financial market, after the company aggressively sold shares due to a default on margin transactions, Bloomberg notes.
Subsequently, Credit Suisse shares fell 14%, while Nomura – Japan’s largest investment bank – suffered a 16% decline yesterday. Credit Suisse and Nomura fell 2.5% and 1.9% today, respectively.
The trend was also followed by the actions of the media group ViacomCBS, the American giant Discovery and Baidu, the company that controls the largest search engine in China.
The three companies saw significant growth this year, despite the fact that investors could not find a concrete reason to explain the results.
For context, the margin call of the brokers requires the clients to increase their level of funds in the account in the conditions in which the value of the funds has dropped below a certain level. The move forced the liquidation of more than $ 20 billion in positions associated with ViacomCBS and Baidu shares.
Part of Hwang’s portfolio was worth about $ 40 billion last week. Now, banking institutions suspect that the value of Archegos’ net capital – that is, almost all of Hwang’s wealth – has exceeded $ 10 billion, but estimates of the company’s total positions continue to rise, from $ 50 billion to $ 100 billion. .
“I did not see anything like it – how quickly and discreetly it evaporated. It must be one of the biggest losses in wealth in history, “said Mike Novogratz, a former Goldman Sachs partner.
The declines have reverberated around the world, from New York to Zurich and Tokyo, raising a number of unanswered questions, including: How can a man take such big risks, facilitated by some of the largest banks? in the world, fixed under the awful financial authorities?
In the United States, investors who have a stake of more than 5% in a listed company are required to disclose their position and subsequent transactions. However, they are not obliged to act in a similar way to holdings obtained through these private instruments, such as those used by Archegos, which allowed him to hide his assets.
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