Something weird just went down in the stock market, and Wall Street is speculating it's the result of a fund liquidation

• A selling spree on Wall Street erased $35 billion from the values of stocks of major companies Friday.
• The selloff appears to be in part the result of the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported.
• Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, Bloomberg reported.
• See more stories on Insider’s business page.

A selling spree erased $35 billion from the stock values of major Chinese tech and US media companies Friday, and Wall Street is speculating it was in part driven by the forced liquidation of an investment firm’s holdings.

Shares of ViacomCBS and Discovery fell as much as 35% Friday, while US-listed shares of China’s Baidu, Tencent Music, Vipshop and others also plunged this week. The selloff came as the broader US market ended the week higher, with the Dow closing up over 450 points, buoyed by optimism over the pace of coronavirus vaccinations.

The selloff in the Chinese internet ADRs and US media shares was in part due to the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported, citing a source familiar with the situation. 

Archegos describes itself as a family investment office focusing on equity investments primarily in the US, China, Japan, Korea and Europe. Archegos is run by Bill Hwang, the founder of the now defunct Tiger Asia Management. Hwang’s fund is “known for employing leverage,” IPO Edge reported.

The group did not immediately respond to Insider’s request for comment and its website appeared to be offline on Saturday. 

Goldman Sachs and Morgan Stanley liquidated large holdings this week, the news site IPO Edge was first to report, adding that the two investment banks have ties to Archegos. The move likely came after Archegos was unable to meet a margin call by an investment bank, CNBC and IPO Edge reported, citing sources familiar with the matter.

Bloomberg reported Saturday that Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, where banks look to find buyers for big stock positions. The block trades included $6.6 billion worth of shares of Baidu, Tencent and Vipshop before the US market opened on Friday morning, Bloomberg reported, citing an email to clients.

Goldman then sold $3.9 billion worth of shares in media giants ViacomCBS and Discovery, as well as luxury fashion retailer Farfetch, and others, according to the report.

Goldman Sachs did not immediately respond to Insider’s request for comment.

Morgan Stanley also led share offerings on behalf of an undisclosed shareholder or shareholders, Bloomberg reported. Some of the trades exceeded $1 billion in individual companies, Bloomberg reported, citing its own data.

Source: Read Full Article