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Bloomberg
One of World’s Greatest Hidden Fortunes Is Wiped Out in Days
(Bloomberg) -- From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world’s greatest fortunes.Even on Wall Street, few ever noticed him -- until suddenly, everyone did.Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time -- a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink.Hwang’s most recent ascent can be pieced together from stocks dumped by banks in recent days -- ViacomCBS Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. -- all of which had soared this year, sometimes confounding traders who couldn’t fathom why.One part of Hwang’s portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos’s net capital -- essentially Hwang’s wealth -- had reached north of $10 billion. And as disposals keep emerging, estimates of his firm’s total positions keep climbing: tens of billions, $50 billion, even more than $100 billion.It evaporated in mere days.“I’ve never seen anything like this -- how quiet it was, how concentrated, and how fast it disappeared,” said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who’s been trading since 1994. “This has to be one of the single greatest losses of personal wealth in history.”Late Monday in New York, Archegos broke days of silence on the episode.“This is a challenging time for the family office of Archegos Capital Management, our partners and employees,” Karen Kessler, a spokesperson for the firm, said in an emailed statement. “All plans are being discussed as Mr. Hwang and the team determine the best path forward.”The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over?One part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago.A disciple of hedge-fund legend Julian Robertson, Sung Kook “Bill” Hwang shuttered Tiger Asia Management and Tiger Asia Partners after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million, and he agreed to be barred from the investment advisory industry.He soon opened Archegos -- Greek for “one who leads the way” -- and structured it as a family office.Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S. Securities and Exchange Commission. So they don’t have to disclose their owners, executives or how much they manage -- rules designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.“This does raise questions about the regulation of family offices once again,” said Tyler Gellasch, a former SEC aide who now runs the Healthy Markets trade group. “The question is if it’s just friends and family why do we care? The answer is that they can have significant market impacts, and the SEC’s regulatory regime even after Dodd-Frank doesn’t clearly reflect that.”Valuable CustomerArchegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as rivals profited by meeting his needs.The full picture of his holdings is still emerging, and it’s not clear what positions derailed, or what hedges he had set up.One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million in U.S. equities must fill out at the end of each quarter. That’s because he appears to have structured his trades using total return swaps, essentially putting the positions on the banks’ balance sheets. Swaps also enable investors to add a lot of leverage to a portfolio.Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring company that’s been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap exposures from trades with their customers.‘Unhappy Investors’Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of GSX’s outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video entertainment company, and 29% of ViacomCBS -- all of which Archegos had bet on big.“I’m sure there are a number of really unhappy investors who have bought those names over the last couple of weeks,” and now regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on Bloomberg TV. He predicted regulators will examine whether “there should be more transparency and disclosure by a family office.”Without the need to market his fund to external investors, Hwang’s strategies and performance remained secret from the outside world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson’s Tiger Management, he wasn’t well-known on Wall Street or in New York social circles.Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.“It’s not all about the money, you know,” he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his calling as an investor and his Christian faith. “It’s about the long term, and God certainly has a long-term view.”His extraordinary run of fortune turned early last week as ViacomCBS Inc. announced a secondary offering of its shares. Its stock price plunged 9% the next day.The value of other securities believed to be in Archegos’ portfolio based on the positions that were block traded followed.By Thursday’s close, the value of the portfolio fell 27% -- more than enough to wipe out the equity of an investor who market participants estimate was six to eight times levered.“You have to wonder who else is out there with one of these invisible fortunes,” said Novogratz. “The psychology of all that leverage with no risk management, it’s almost nihilism.”(Adds comment from Archegos in 8th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
3h ago
Bloomberg
Coal Country Races to Shield Itself From Biden’s Climate Plan
(Bloomberg) -- Coal’s slow downfall is gaining momentum across the U.S. as clean energy becomes cheaper and wins widespread support, but lawmakers in mining states from Wyoming to West Virginia are determined to fight back with a series of roadblocks to President Joe Biden’s plan to cut greenhouse-gas emissions. Seeking to prolong the lifespan of an industry that’s vital to local economies, at least five states are seeking to pass legislation that would give them weapons such as bigger hurdles to shut coal-fired plants, a war chest for potential legal battles, more power to state regulators over utilities, tax cuts and cheaper state insurance for power stations. The race to shield coal country from an energy transition that Biden contends will generate jobs and wealth in everything from solar-panel manufacturing to wind power generation highlights the political complexity of the shift to renewables. Even some Democrats in coal-producing states support the efforts to protect people’s livelihoods and the funding of schools and other public services in areas that derive income from the dirtiest fossil fuel. Meanwhile, utilities say the measures will drive up costs for ratepayers, while environmental groups say they’re only slowing, not stopping, the eventual move away from coal.“It’s not planning for the future,” said Dennis Wamsted, an analyst for the Institute for Energy Economics and Financial Analysis. “It’s protecting the past.”In Colstrip, a town in eastern Montana founded by the Northern Pacific Railway in 1924 to provide coal for steam locomotives, a power plant supplied by local mines has long been crucial to the area’s economy. That’s why Mark Sweeney, a Democratic state senator, supports proposals aimed specifically at keeping it open. Even though he recognizes climate change is a serious issue and that his stance makes him an outlier in his party, he says he worries about the devastating impact of a shutdown to the community. If it shuts, "it's a ghost town," he said.Sweeney, who hopes the Colstrip plant can run for at least another 10 years, also argues that few emissions are produced delivering coal from the nearby mine, and that’s much more efficient than shipping the fuel to power plants in other states or across the world. “The last one that should be shut down is the one that's sitting on a coal pile,” he said by phone. “We have a whole lot of coal."In Wyoming, the country’s biggest coal producer, the Republican-dominated legislature is considering a bill that would require the Public Service Commission to assume that early retirement of coal-fired power plants isn’t in the state’s best interest, making it harder for utilities to shut facilities they’ve determined aren’t economic. Another proposal would set aside half a million dollars for legal challenges against other states that pass laws restricting the use of coal.One of the goals is to protect mining jobs that underpin the local economy, said Eric Barlow, a Republican state representative who co-sponsored some of the legislation. His district in the northeast part of the state is in the heart of coal country, where output has plummeted in the past decade as utilities started using more renewables and natural gas.“There's no doubt we're in a transition,” said Barlow, who raises cattle, sheep and yak on his ranch. “You can imagine what that does for jobs in this community.”Republicans dominate the state’s government, controlling both chambers and holding the governor’s office. The effort is supported by the governor and at least some of the legislation is likely to become law, said Travis Deti, executive director of the Wyoming Mining Association. “Wyoming is pulling out all the stops to try to save the coal industry,” Deti said.The proposals don’t sit well with utilities, which typically seek to produce power at the lowest cost through a mix of generating assets. When a plant no longer fits into the equation — because maintenance costs go up at aging facilities, or another asset might have lower fuel costs or a coal site may need to install expensive pollution-control systems — then closing it will help ensure ratepayers don’t pay unnecessarily higher costs.That’s what’s likely to happen if the state assumes more control over this decision, said David Eskelsen, a spokesman for Rocky Mountain Power, a PacifiCorp utility that operates four coal power plants in Wyoming. The company converted part of one of them to gas last year.“Legislative attempts to force these plants to stay open does raise concerns about the price of electricity customers will have to pay,” he said.Power providers in other states concur. West Virginia, the second-biggest coal producer, is considering a bill that would give state agencies additional oversight and approval authority over utilities that are seeking to close a power plant. The result could be higher power prices, or even making the state less attractive for outside investors, according to Jeri Matheney, a spokeswoman for Appalachian Power.“It certainly would make closing a plant more difficult,” she said. The American Electric Power Co. utility has three coal plants in West Virginia, including the Mitchell facility that the company has said is close to being uneconomic and may go dark in 2028.That’s what Rupie Phillips, the Republican state senator who co-sponsored the bill, wants to avoid. Coal accounts for about 20% of the state’s economy, and declining demand for the fuel at U.S. power plants threatens jobs in the region.“I’m dead against shutting proven things down to make renewables more attractive,” he said. “Not on my watch.”That strategy is ignoring a global trend away from fossil fuels, said Bill Corcoran, director of the Sierra Club’s Beyond Coal campaign.“Sitting on a lot of coal reserves is no longer a path to prosperity,” he said. “These states are stumbling around to find some way to delay the inevitable transition.”Other states are also pursuing legislation to protect local coal industries. North Dakota is considering a bill that would reduce taxes on coal power plants, while another would consider whether the state should offer insurance to the industry after premiums from third-party insurers climbed. Arkansas introduced legislation aimed at making it harder for utilities to close power plants.In addition to the proposals to protect the Colstrip plant in Montana, another bill would require the state to evaluate the economic impact on local communities when a utility sought to shutter a power plant, another move designed to make the process of shutting down a site harder. While that one has been tabled in the Montana House of Representatives, its Republican sponsor Braxton Mitchell expects it to be picked up in the state senate soon.“No plant, no mine,” Mitchell said. “No mine, no school, no libraries, no parks, no roads. It gets to be a pretty ugly picture pretty fast.”(Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, has committed $500 million to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the U.S. by 2030.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
17h ago
Reuters
Global banks brace for losses from Archegos fallout
Global banks may lose more than $6 billion from the downfall of Archegos Capital, sources familiar with trades involving the U.S. investment firm said on Monday, and regulators and investors fear the episode could reverberate more widely. Japan's Nomura and Credit Suisse of Switzerland warned of major losses from lending to Archegos for equity derivatives trades, triggering a worldwide sell-off in banking stocks.
1d ago
Bloomberg
BlueBay’s Pound U-Turn Signals U.K. Post-Brexit Pain Starts Now
(Bloomberg) -- The risks to the pound’s 2021 recovery may be becoming too numerous to bear as Britain’s currency looks poised to end a five-month winning streak.Everything from waning euphoria over the nation’s vaccine-rollout program to renewed worries about the state of the post-Brexit economy and a squeeze on public finances are taking the wind out of a rally that’s made sterling the biggest gainer this year among the G-10 currencies after the Canadian dollar. It’s slipped more than 1% in March so far, on track to interrupt an advance since September that drove it to its strongest level in almost three years.“Too much optimism may be in the price,” said London-based Mark Dowding, who this month reopened bets against the pound at BlueBay Asset Management LLP, where he oversees $70 billion. “The lockdown in the U.K. remains more restrictive than elsewhere,” putting the shackles on growth.The pessimism underscores the mounting difficulties faced by Prime Minister Boris Johnson. Questions over Britain’s future following its break last year from the European Union are taking center stage again, even during one of the world’s most successful Covid-19 inoculation campaigns. Trade data showed EU shipments collapsed in January. The budget deficit is set to hit about 15% of GDP this fiscal year, the highest since the Second World War.For Dowding, that means sterling may retreat more than 5% to $1.30 in the next three months, a level last seen in November -- when markets were being rattled by doubts over whether a Brexit deal could be reached. The chances of the currency touching that level by year-end are almost 50%, according to Bloomberg probability calculations based on a combination of options and forecasts. Sterling slipped as much as 0.2% to $1.3757 on Monday.Some of the shine is already starting to fade. Data from the Chicago-based Commodity Futures Trading Commission in Washington show investors have started to trim bullish bets on the pound. After their long positions hit a one-year high earlier in March, leveraged funds scaled back their wagers for a third-straight week.Even with a Brexit deal and an agreement on financial regulation out of the way, the U.K.’s departure from the EU has ushered in a fresh series of risks, including tension on the Irish border and a possible referendum on Scottish independence.Brexit will bring “a slowdown in potential growth, so from a longer-term perspective we would expect sterling to resume its downward trend,” said Seema Shah, the chief strategist at Principal Global Investors in London who sees the pound retreating to $1.30 as early as the third quarter. “Once this vaccine rollout is done and other countries have caught up, and the U.K. no longer looks like a shining light, we’re back to where we were.”Some 47% of the U.K. population had received at least one dose of vaccine as of March 25, compared with 41% in the U.S. and just 14% in Germany, according to data collected by Bloomberg News and Johns Hopkins University. Britain now expects to receive the first doses of the U.S.-made Moderna Inc. vaccine within weeks, Culture Secretary Oliver Dowden said on Sunday.Vaccination success has helped stoke optimism the country’s early reopening and a services-led recovery could put it ahead of its peers. The median of analysts’ forecasts compiled by Bloomberg is for the pound to end June at $1.39, compared with $1.35 in early January.“Negative sentiment toward the pound is gone,” said John Roe, the London-based head of multi-asset funds at Legal & General Investment Management, which turned neutral on the pound-dollar after closing its short positions on Feb. 25. “The U.K. is much less prone to a Covid-related relapse.”Bank of England Chief Economist Andy Haldane said last week there could be a “rip-roaring” recovery even if consumers spend only a small proportion of savings accumulated during lockdown. Consumers did return to online and in-store shopping in February after a slump at the beginning of the year, official figures published Friday showed. Still, the rebound was modest.Phil Rush, at research firm Heteronomics, a Malvern, England-based financial research firm, isn’t convinced about such a recovery. He says savings have been accumulated by households least likely to spend them, and there’s no sign of any likely spending splurge.”The longer-term picture is far less positive” for the pound, said Antony Foster, head of G-10 spot trading at Nomura International Plc in London. “We all know the public finances are in dire straits. There are a lot of little bad things in the background that individually have the potential to be pretty systemic. Add them all together and it’s just not a great picture.”(Updates pricing, adds detail on Moderna Inc. vaccine in ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
20h ago
Yahoo Finance
Here's why Wall Street is terrified over 'Tiger Cub's' surprise portfolio blowup
Wall Street is looking over their backs following the portfolio blowup of whale Bill Hwang.
8h ago
Bloomberg
Cathie Wood’s ETFs Ditch Ownership Caps, Add SPAC Warning
(Bloomberg) -- Cathie Wood has spent months defending Ark Investment Management from critics who say the money manager has too much cash tied up in too few stocks. The firm’s latest move is handing them fresh ammunition.In a filing late last week, Ark altered the prospectuses for its exchange-traded funds to remove clauses limiting its exposure and concentration risks.The changes eliminate a 30% cap on how much of each fund’s assets could be invested in the securities of a single entity, and a 20% limit on the amount of a company’s shares an ETF could own.It also introduced language acknowledging funds may buy into blank-check firms and noting the risks of buying shares in special-purpose acquisition companies that haven’t yet decided what businesses they’ll own. The ARK Autonomous Technology & Robotics ETF (ticker ARKQ) last week bought shares of a SPAC backed by tennis star Serena Williams.These are eye-catching changes for Ark, founded by Wood in 2014. Concerns have swirled around the New York-based firm in recent months after a stellar year saw ETF assets surge at one point to more than $60 billion. Ark invests in companies involved with disruptive trends, which mean it has a limited pool of targets in which to deploy that money.“It seems like they’re willing to take on more single-stock risk if they truly believe in a company,” said Mohit Bajaj, director of ETFs for WallachBeth Capital. “It’s truly active management.”Testing the LimitIn February as its flagship product, the Ark Innovation ETF (ARKK), peaked, the firm controlled 20% or more of at least three companies, according to data compiled by Bloomberg. This was spread across several funds, so didn’t yet test the 20% cap that’s now removed from prospectuses.In addition to deleting the general limits, the March 26 filing removed caps on ownership of depositary receipts, rights, warrants, preferred securities and convertibles.A representative for Ark didn’t immediately respond to a request for comment.The adjustments come on the eve of Ark’s first new ETF launch in two years. The ARK Space Exploration ETF (ARKX) is due to begin trading on Tuesday, according the firm’s website.In a nod to the kinds of concentration risk some investors fret about, the new ETF’s second-biggest holding will actually be another Wood product -- 6.1% of the fund will be invested in Ark’s 3D Printing ETF (PRNT).“When you have a situation where the risk is concentrated and there is a lot of leverage in the system, it creates even bigger risks,” said Matt Maley, chief market strategist at Miller Tabak + Co.(Updates with ARKX fund information in final paragraphs, analyst comment)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
12h ago
Reuters
Nomura, Credit Suisse warn of big losses after Archegos share dump
Nomura and Credit Suisse are facing billions of dollars in losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls, putting investors on edge about who else might have been caught out. Losses at Archegos Capital Management, run by former Tiger Asia manager Bill Hwang, had triggered a fire sale of stocks on Friday, a source familiar with the matter said. A phone message left for Archegos at its New York offices on Monday morning was not immediately returned.
20h ago
Bloomberg
Traders Are ‘Glued to Their Screens’ and Set for Volatile Open
(Bloomberg) -- Global traders are bracing for what’s shaping up to be one of the most anticipated opens for U.S. equities in months following an extraordinary $20 billion wave of block trades Friday that rattled investors worldwide.Archegos Capital Management LLC -- the family office of Bill Hwang -- was behind the sales, dumping shares of Chinese tech giants and U.S. media conglomerates, according to two people directly familiar with the trades. While some of the stocks targeted in the block trades initiated by Goldman Sachs Group Inc. and Morgan Stanley rebounded at the end of Friday’s session, ViacomCBS Inc. and Discovery Inc. didn’t. They posted their biggest daily losses ever.Morgan Stanley traded about $13 billion including Farfetch Ltd., Discovery, Baidu Inc., and GSX Techedu Inc., while Goldman sold $6.6 billion worth of shares of Baidu, Tencent Music Entertainment Group and Vipshop Holdings Ltd. That move was followed by the sale of $3.9 billion of shares in ViacomCBS Inc. and IQiyi Inc., according to an email to clients seen by Bloomberg.Morgan Stanley was shopping a large block of ViacomCBS shares on Sunday, according to a person familiar with the matter. About 45 million shares were offered on behalf of an undisclosed holder, the person said.Sharif Farha, a Dubai-based portfolio manager at Safehouse Global Consumer Fund, said ViacomCBS and Discovery may actually recover on Monday and noted that the market’s fundamentals remain intact.“The correction was not structural,” he said.Farha expects benign price action to start the day, but anticipation for Monday’s open remains high.“Traders everywhere know the story and will be glued to their screens,” he said.Meanwhile, tech stocks fell in Hong Kong on Monday, with the Hang Seng Tech Index -- which includes many Chinese giants -- losing as much as 2.7%. Baidu Inc. slid as much as 5.1%. Analysts at Citigroup Inc. said the massive selloff in U.S.-listed shares of Chinese technology companies isn’t linked to their fundamentals and creates a bigger buying opportunity.In Japan, Nomura Holdings Inc. tumbled by a record after disclosing a “significant” possible loss from its U.S. operations. That’s even as the broader Nikkei 225 Stock Average advanced 0.7%.June contracts on the S&P 500 were down 0.6% as of 3:34 p.m. Tokyo. Futures on the Nasdaq 100 dropped 0.8%.READ: Nomura’s Loss Warning Is Said to Be Tied to Archegos SelloffHuge RalliesThe possibility of additional block trades still looms over the market, while the traditional end-of-quarter volatility may contribute to sharper swings on high-flying stocks. ViacomCBS and Discovery have rallied this year.“What most people appear to have missed is that both of these companies have seen their share prices almost quadruple since October last year,” Michael Hewson, chief market analyst at CMC Markets UK, said in a note on Sunday, referring to ViacomCBS and Discovery.The selloff on the two media companies started earlier last week, when ViacomCBS reported an offering of $2 billion in shares after closing at a record high. The stock fell 9.1% the following day. On Friday, a downgrade by Wells Fargo and the large block trades compounded the selling pressure.ViacomCBS closed 27% lower to $48.23, down from a high of $100.34 on March 22. Discovery also slumped 27% to $41.90, down from $77.27 on March 19. Other media stocks tumbled too, with AMC Networks Inc. losing 6.4% and Fox Corp. retreating 6.2%.Read more: ViacomCBS, Discovery Plunge on New Downgrade, Block Trades (1)Viacom and Discovery shares are also echoing volatility in a host of companies that soared on lockdown trades, including Zillow Group and Peloton Inc. and to some degree the entire blank-check SPAC space. Earlier this month, data compiled by Susquehanna International Group showed that volatility futures expiring three months from now were hovering 20% above the average level or prior instances when the VIX traded at 20.“We have seen an increase in volatility in equities capital markets, tech, working-from-home names with retail stepping back and more rotation to value in the last few weeks,” said Emmanuel Cau, a strategist at Barclays. “It may have hurt a number of funds that were overly exposed to these trades.”U.S. equities notched their biggest gain in three weeks on Friday and the S&P 500 closed 1.7% higher as the bull market celebrated its first anniversary since hitting pandemic-era lows.“The markets could start trading in a friendly manner at the beginning of the week,” said Andreas Lipkow, Comdirect Bank strategist. “Although there is currently some major profit-taking and unusual block trade activities, these market asymmetries can currently still be processed well.”(Adds moves in Asia tech stocks in the ninth and 10th paragraphs.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
21h ago
Reuters
S&P 500 ends a hair lower; hedge fund default concerns hit banks
The S&P 500 ended just slightly in the red on Monday, with bank shares falling amid warnings of potential losses from a hedge fund's default on margin calls, while optimism over the economy limited the day's declines. The Dow ended higher, with shares of planemaker Boeing Co rising 2.3% after the company reached a deal with U.S. budget carrier Southwest Airlines Co for a variant of the 737 MAX aircraft. Nomura and Credit Suisse are facing billions of dollars in losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls, putting investors on edge about who else might have been caught out.
17h ago
Bloomberg
Tiger Cub Hwang’s Family Office Behind Friday Trade Frenzy
(Bloomberg) -- The family office of former Tiger Management trader Bill Hwang was behind the unprecedented selling of some U.S. stocks Friday, according to two people directly familiar with the trades.Archegos Capital Management was forced by its banks to sell more than $20 billion worth of shares after some positions moved against him, said the people, who asked not to be named because the details aren’t public. The companies involved ranged from Chinese technology giants to U.S. media conglomerates.Morgan Stanley traded about $13 billion, including Farfetch Ltd., Discovery Inc., Baidu Inc. and GSX Techedu Inc., said the people, while Goldman Sachs Group Inc. sold $6.6 billion worth of shares of Baidu, Tencent Music Entertainment Group and Vipshop Holdings Ltd. before the market opened in the U.S, according to an email to clients seen by Bloomberg News.That move was followed by the sale of $3.9 billion of shares including ViacomCBS Inc. and iQiyi Inc. the email said.Hwang didn’t reply to an email seeking comment Sunday. A Goldman spokesperson declined to comment and a Morgan Stanley official didn’t immediately respond.ViacomCBS and Discovery posted their biggest declines ever Friday, after the selling and analyst downgrades. ViacomCBS closed 27% lower to $48.23, down from a high of $100.34 on March 22. Discovery also slumped 27% to $41.90, down from $77.27 on March 19.Wall Street figures have been feverishly speculating about the identity of Friday’s seller. The liquidation had triggered price swings for every stock involved in the high-volume transactions, rattling traders.Block trades -- the sale of a large chunk of stock at a price sometimes negotiated outside of the market -- are common, but the size of these trades and the multiple blocks hitting the market during the normal trading hours aren’t.Hwang was an institutional stock salesman at Hyundai Securities Co. in the early 1990s, where he dealt with Julian Robertson’s Tiger Management. Robertson hired him in 1995 after Hwang won an annual prize awarded to the person outside of Tiger who had contributed most to the fund’s success.After Robertson closed Tiger, Hwang set up Tiger Asia Management, in part with money seeded by his mentor Robertson.In December 2012, Hwang admitted to illegally using inside information to trade Chinese bank stocks and agreed to criminal and civil settlements of more than $60 million.(Updates with reasons behind selling in second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
1d ago
Quartz
More women are turning to investing during the pandemic
After getting furloughed by American Airlines, and watching her side gig leading trips outside of the US evaporate overnight at the start of the pandemic, Brittany Floyd felt unsettled. Having lived across every aspect of the income scale—she grew up in a low-income household, where her mother worked as a custodian and her father as a construction worker—she had no intention of going back to a life of financial struggle. The pandemic had Floyd thinking about wanting to be financially independent and not having all her money tied up in one sector of the economy.
20h ago
Reuters
Nomura flags $2 billion loss, cancels bond issue; shares plummet
TOKYO (Reuters) -Nomura Holdings Inc on Monday flagged a possible $2 billion loss at a U.S. subsidiary, prompting Japan's biggest brokerage and investment bank to shelve a hefty bond issuance and sending its stock tumbling by the most in over a decade. Nomura's stock was greeted by a deluge of sell orders at market open, pushing its price down as much 16% in early trade. The trades were linked to sales of holdings by Archegos Capital Management, a person with knowledge of the matter told Reuters.
1d ago
Reuters
Citigroup announces new investment banking unit in green push
The new unit, to be called the Natural Resources and Clean Energy Transition Group, will be headed by Steve Trauber and Sandip Sen, according to a memo seen by Reuters on Monday. The unit will include the chemicals, energy and power franchises, showed the memo from Tyler Dickson and Manuel Falcó, co-heads at Citi's Banking, Capital Markets and Advisory business. Trauber will oversee the unit's investment banking front, while Sen will be in charge of corporate banking, the memo said.
12h ago
CoinDesk
You’re a Lemon if You Buy a Tesla With Bitcoin
Should you purchase a car with bitcoin and then need a refund, the manufacturer has some special terms and conditions.
16h ago
CoinDesk
Market Wrap: Bitcoin, Ether Gain After Visa Deal as Stocks Struggle With Archegos Margin Call
The quick recovery to near $58,000 demonstrates stronger confidence from investors in the oldest and largest cryptocurrency.
7h ago
Bloomberg
Once High-Flying Tiger Cub Stumbles Again on Leveraged Bets
(Bloomberg) -- He was a hot-shot disciple of the hedge-fund legend Julian Robertson -- one of the stars to strike out on his own from the vaunted Tiger empire. Now Bill Hwang is at the center of an extraordinary spree of giant stock trades that’s reverberated through financial markets and set Wall Street abuzz.Morgan Stanley and Goldman Sachs Group Inc., along with other major banks, forced the liquidation of more than $20 billion of holdings for Hwang’s New York-based Archegos Capital Management on Friday, according to people familiar with the transactions. Among the sales were shares of ViacomCBS Inc., GSX Techedu Inc., Farfetch Ltd. and Discovery Inc.The unprecedented selloff is the latest twist in Hwang’s long and controversial career. About two decades ago, he was a peer at Robertson’s firm of Chase Coleman, who was Wall Street’s highest-earning hedge fund manager last year. Today, having long ago stopped managing outside money, he’s facing his second major scandal.How and why marquee-name banks embraced Hwang after his first stumble -- an insider trading plea in 2012 -- and enabled him to run up so much leverage is an open question on Wall Street, though his frequent trading and use of borrowed money meant he was a profitable client.Much of the leverage was provided by the banks through swaps, according to people with direct knowledge of the deals. That meant that Archegos didn’t have to disclose its holdings in regulatory filings, since the positions were on the banks’ balance sheets. Swaps are also an easy way to add a lot of leverage to a portfolio.Market participants estimate that his assets had grown anywhere from $5 billion to $10 billion and total positions may have topped $50 billion.Hwang didn’t reply to multiple emails since Friday’s market moves, and other Archegos employees reached by phone declined to comment on the liquidation of its positions or on the losses.Quiet NameDespite his roots at Robertson’s Tiger Management, Hwang was never a well-known name on Wall Street or in New York social circles.A devout Christian, he’s a trustee of the evangelical Fuller Theology Seminary in California and the co-founder of the Grace and Mercy Foundation, according to Fuller’s website. The charity is dedicated to the areas of Christianity, art, education, justice and poverty.After leaving Tiger Management as Robertson wound down the firm, Hwang, who is in his mid-50s, spent a decade running his Tiger Asia Management -- backed by his former boss -- and building it into a multi-billion firm with top returns.In 2012, he closed the hedge fund after he admitted on behalf of the firm in federal court in Newark, New Jersey, to trading on inside information. According to the Justice Department, Tiger Asia reaped $16 million of illicit profits in 2008 and 2009.Hwang bounced back almost immediately, opening a family office named Archegos -- Greek for ‘one who leads the way.’Best SalesmanAfter earning a degree in economics from the University of California at Los Angeles in 1988, and getting an MBA from Carnegie Mellon University, Hwang became an institutional stock salesman. He was at Hyundai Securities Co. in the early 1990s when he caught the eye of Robertson, who was one of his clients. One year, Tiger Management awarded Hwang $50,000 for the charity of his choice -- an annual prize for the person outside the firm who Robertson deemed had benefited Tiger the most.“He was the best salesman we had,” Robertson said in a 2006 interview. “He introduced us to Korea. No one was focusing on Korea back then and we hired him soon after.” After Tiger Management shut down, Robertson seeded Hwang with about $25 million for his own firm. “He’s had a meteoric rise,” Robertson said at the time.As a manager of his own fund, Hwang didn’t provide much transparency to investors about his positions or what contributed to returns, said a person who invested with him. Even so, clients stayed because he was a money-maker, with an annualized return of 16% over the life of the fund.How New Wealth, Few Rules Fuel Family Office Boom: QuickTakeAt Archegos, his fortune grew with his outsized bets and rapid trading, a style that Hwang never spoke about.“It’s not all about the money, you know,” he said in a rare interview with a Fuller executive in 2018, in which he spoke about his calling as an investor and his faith. “It’s about the long term, and God certainly has a long-term view.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
1d ago
Bloomberg
Romania Gives Currency Go-Ahead to Leave Year-Long Trading Band
(Bloomberg) -- The Romanian leu headed for its biggest daily decline in more than a year, an unusual move for a currency that’s tightly controlled by the central bank.The leu slipped as much as 0.4% to a record low of 4.9085 per euro on Monday, weakening from a 4.80-4.90 trading range it had mostly held on to over the last 12 months. That said, the currency has been outperforming eastern European peers since the start of the pandemic due to the central bank’s policy on tempering moves in the exchange rate.The “Romanian central bank is not concerned about the recent leu decline,” central bank spokesman Dan Suciu said by phone. Its weakness this year has a minor impact on inflation, he said.The central bank’s remarks suggest policy makers may be allowing the currency move toward a new trading band against the euro. Similar small devaluations have typically come in the first three months of the year as the authority allows the leu to follow depreciation among peers with a lag, while smoothing daily volatility.Some analysts were calling for a new trading band even before the year began. At the end of 2020, UniCredit SpA’s Dan Bucsa predicted a shift to 4.9-5 per euro at the beginning of this year.“The market, ourselves included, was widely expecting a correction higher for the pair,” said Valentin Tataru, an analyst at ING Bank in Romania who sees the leu weakening to 4.92 per euro by year-end. “We do not foresee a prolonged depreciation period.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
14h ago
Bloomberg
H&M’s Xinjiang Setback Has Tiny, Loss-Making China Peers Surging
(Bloomberg) -- Shares of some tiny Chinese apparel companies are among the top performers in the country’s stock market over the past few days. The rally comes as several of their foreign peers face a backlash over their stance on using cotton sourced from the contentious Xinjiang region.Shanghai Metersbonwe Fashion & Accessories Co. and Ribo Fashion Group Co. each surged 33% over the past three sessions to feature among the biggest gainers in about 4,000 Chinese A-shares during this period. The stocks have jumped after Chinese social-media users last week called for a boycott of Swedish retailer Hennes & Mauritz AB, having found an undated company statement about accusations of forced labor in Xinjiang. Those calls quickly spread to other foreign brands including Nike Inc. and Burberry Group Plc.The operating performance of the two Chinese companies mentioned above speaks to the speculative nature of the recent rally in their stocks.Shanghai Metersbonwe said in October that it will post a loss as much as 820 million yuan ($125 million) for 2020. That would mark a second year of losses, which could trigger a delisting-risk warning from the stock exchange. Ribo Fashion issued a profit warning in January, citing lower sales due to the pandemic and one-off losses from a unit.“It’s easier for short-term investors to trade these two stocks with poor earnings and few institutional investors,” said Zhang Gang, an analyst at Southwest Securities Co. “The speculative buying on nationalist sentiment is irrational and would be unsustainable.”Further, it would be “hard to shake the consumption habits” of customers of foreign brands, he said.Meanwhile, shares of Shanghai Metersbonwe surged by the daily limit in early trading on Tuesday, while those of Ribo Fashion climbed as much as 7.7%.Cotton producer Xinjiang Sailimu Modern Agriculture Co. has emerged as another big beneficiary as foreign brands grapple with the backlash. Its stock also jumped 10% on Tuesday, adding to a 33% surge in the previous three sessions.Luxury Companies at Risk of New Tensions With China: Bernstein(Adds chart, updates prices.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
55m ago
Reuters
Analysis: With stick and carrot, Saudi starts winning over firms in regional race
When CSG opted to shift its regional headquarters this year from Dubai to Riyadh, it marked an early win for Saudi Arabia and proved a surprisingly easy move for the U.S. technology firm: the new office was up and running in just two months. CSG is among several foreign companies that agreed earlier this year to set up regional offices in Saudi Arabia rather than overseeing operations remotely from Dubai, the buzzing commercial hub in neighbouring United Arab Emirates.
23h ago
Yahoo Finance
Stock market news live updates: Stocks mixed as Archegos margin call ricochets across markets; Suez ship freed
Stocks are giving back gains after a strong week, with little seen moving the needle before March's jobs data.
8h ago

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