Hedge fund default Archegos Capital triggered $30bn in stock sales on Friday
Hedge fund default Archegos Capital triggered $30bn in stock sales on Friday
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Banks Nomura and Credit Suisse on Monday warned of significant losses related to the default of hedge fund Archegos Capital. A number of stocks, including ViacomCBS, Discovery, Baidu and Tencent Music, posted their biggest declines in history on Friday amid large volume sales of their shares by major off-exchange players.
Japan's major investment bank Nomura and Swiss investment bank Credit Suisse said on Monday they were suffering significant losses after the US hedge fund, according to media reports, is Archegos Capital Management, defaulted on margin calls last week. Nomura said the potential losses could amount to $2bn.
According to insiders, late last week major banks: Morgan Stanley (MS), Goldman Sachs Group (GS), Credit Suisse and Deutsche Bank AG forced Archegos to sell large stakes in Chinese technology companies through unregistered deals, among others. Late on Friday night, Goldman Sachs included many of the shares owned by Archegos on its balance sheet and then liquidated them through distributions to clients. Goldman told shareholders that any losses it would incur as a result of the Archegos closing were likely to be immaterial.
Shares in Goldman Sachs, Credit Suisse and Nomura fell before trading opened on Monday.
Most of these deals were on an over-the-counter basis and, according to an anonymous source at The Wall Street Journal, the volume of these sales approached $30bn on Friday.
This included shares in:
- US media companies ViacomCBS (VIAC) and Discovery (DISCA) their shares were down 27.3% and 27.45% at the close of trading on Friday;
- Chinese technology companies Baidu (BIDU) and Tencent Music (TME), Farfetch (FTHC), iQIYI (IQ), GSX Techedu (GSX) and others. GSX Techedu shares fell 41.56 per cent at the close of trading on Friday.
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