The downfall of Archegos

Late last week, stockmarkets were rattled as the share prices of a handful of big-name tech and communications stocks – including Chinese tech giant Baidu and US media group ViacomCBS – plunged, as huge blocks of their shares were sold into the market. It turned out that a family office called Archegos Capital Management, run by former hedge-fund manager Bill Hwang, had run into trouble in the wake of a “margin call” (see below) from its lenders, triggering the sale of more than $20bn-worth of shares. So what happened, and is it anything that you need to worry about?

Archegos’s problems appear to have been triggered by ViacomCBS specifically. Between the start of the year and 22 March, shares in the media conglomerate almost tripled in value. Viacom decided to take advantage by issuing new shares. The share price fell, partly because existing shareholders would be diluted, but also because it had already seen such extraordinary gains, and no doubt some investors were looking for excuses to take profits. The decline appears to have triggered the margin call, and the resulting share sale exacerbated the decline.

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