Wall Street Braces for Possible Ongoing Fire Sale

Image Credit: iStock Images, Andrey Krav.

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A massive sell-off Friday wiped $33 billion in value off several Chinese tech and U.S. media stocks, including ViacomCBS, Discovery, Baidu and Tencent.

Now we know who was behind it, and there’s a panic over what’s next. Archegos Capital, a private investment firm hit hard by cash demands from investors, made the selloffs. Traders enter the week frantically trying to figure out how much more it has to offload.

Backfire at ViacomCBS Leaves a Firm in Ashes

ViacomCBS stock tanked last week after a new shares offering backfired. Influential Wall Street firm MoffettNathanson raised concerns about the cable giant’s performance and downgraded the stock to sell. A nosedive followed.

Archegos was heavily exposed and, when ViacomCBS stock started tumbling on Tuesday and Wednesday, its brokers started calling and demanding cash. By Friday, Archegos had initiated massive sell-offs: Goldman Sachs and Morgan Stanley dumped blocks of shares worth $19 billion at discount prices throughout the day, with other funds possibly joining the sales.

ViacomCBS ended Friday worth half what it was on Monday. Traders were shocked.

  • “I’ve never seen something of this magnitude in my 25 year career,” Michel Keusch, a portfolio manager at Bellevue Asset Management told Bloomberg, of the selloffs
  • “Are they done? Is this over? Or come Monday and Tuesday, are markets going to be hit by another wave of block trades?” asked Oliver Pursche, a senior vice president at Wealthspire Advisors.

Fund Goes Dark: Some traders think the peak sales on Friday suggest Archegos is done with its fire sale. Others are worried billions of dollars’ worth of positions remain to be sold. One place you won’t get an answer: Archegos itself. The firm’s website is no longer active and, when reached by the Financial Times, its head trader in New York hung up the phone.

the takeaway

Archeos is a Greek word, meaning “prince” or “captain,” used four times in the New Testament to refer to Jesus. Founder Bill Hwang said his strategy asked “where can I invest to please our God?”