Ex-insider trader and ex-Tiger cub, Bill Hwang is at the center of of the greatest margin call of all time. On Friday, his firm Archegos Capital, was forced by some banks to sell more than $20 billion in shares after some of his bets went haywire. Hwang ran a long-short strategy, with an exceptionally large (pre-08 Lehman levels) leverage, meaning that for every dollar of his own, he’d pile on several times as much in debt, from banks such as Goldman Sachs.
Leverage is a beautiful thing when it works but when it doesn’t, banks come margin calling to get their money back. That happened on Friday, and triggered a frenzy to sell Archegos-owned shares in massive blocks, which sent stocks such as ViacomCBS and Discovery crashing (both posted their biggest daily losses ever).
Short Squeez Takeaway: Hwang has a murky past to say the least. Why Goldman Sachs was lending an ex-insider trader huge sums of money on highly leveraged positions is a question only DJ D-Sol can answer. Oh and the drama might not be over yet, brace yourselves for an exciting open on Monday. (We hope you don’t own any of the stocks Hwang is offloading)