Archegos banks discussed a partnership to stop selling frenzy
The biggest counterparts Bill Hwang’s Archegos Capital last week explored ways to limit market bets on ViacomCBS internal stock bets, according to four people who reported the talks, but the efforts angered and paved the way for days. chaotic trade.
Family problems in the office before they explode public view At the end of the week, representatives of Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Nomura trading partners held a meeting with Archegos to discuss the mixed trades in a specific way.
The banks, thanks to Archegos, took on exposure to volatile shares worth billions of dollars swap contracts, and Hwang tried to address the margin calls caused by the fall in ViacomCBS shares. An orderly purchase would minimize the impact on the market and the success of the balance sheets, while Archegos worked to sell stakes in companies accumulated through derivative instruments.
It is not clear whether it was understood, but some sources said it was quickly clear that some banks had started selling to stop their losses. Those familiar with the deal said Credit Suisse and Morgan Stanley had both unloaded small shares of the market after the meeting.
“It was like a chicken game,” one person said.
On Friday morning, hopes for coordination were dashed and floods opened up as Goldman began making billions of dollars in global investments related to Archegos. Morgan Stanley came in a few hours later, and they both sold roughly $ 19 billion that day in large blocks alone, according to people.
For major brokers that haven’t moved fast enough, including Credit Suisse and Nomura, it’s been a result painful. Nomura has warned that its losses could be as much as $ 2 billion. Credit Suisse could have a loss of between $ 3,000 and $ 4 billion, FT reported.
“The reality is in the sale of fires, if you don’t get out the door first you will be burned,” said one of the bankers involved. “There is no honor among the banks, [it’s a] the question of who gestures first “.
A source familiar with the process said there have been attempts to regroup over the weekend, after Friday’s stock sales saw a significantly lower value of stocks linked to Archegos, but the idea of halting sales was not achieved.
Goldman and Morgan Stanley were “not ready to play ball,” a source said in an interview. “The idea was to perform at the concert on the weekend so as not to get to where we are now on Monday but some of the proposed stops were not acceptable.”
The negotiations between Archegos Capital and its major brokers have resonated on Wall Street, and thorny questions have arisen about the leverage banks have offered the family office and how a secret investor has amassed large positions under that radar.
Money managers are also not wondering how much more is left to dissolve and whether their own trading books can be damaged.
“Goldman will look into the situation and. . . he decided that the first cut was the cheapest. You go first, in these situations, you may not come out the best but you certainly do better than the boys who go second and third, ”said a Tokyo banker.
One person familiar with the matter said Goldman said the financial impact would be “irrelevant” from the negotiation failure.
Morgan Stanley is located in the midst of the storm, as Archegos ’main broker, as well as providing investment banking services to ViacomCBS. Last week, it helped the media group raise nearly $ 3 billion in new equity and convertible debt to fund its initial streaming business – a major dilution of existing shareholders caused the initial decline in ViacomCBS shares.
Over the weekend, Morgan Stanley threw in another two billion dollars with the ViacomCBS share, as well as business-related deals with Archegos.
Other major brokers also want to clean up the books. On Monday morning, Wells Fargo offered 18 million shares of ViacomCBS worth $ 846 million, people said on the subject.
Additional report by Owen Walker in London