Archegos Capital Collapse - What's stopping traders/investors from buying stocks that are sold on fire sale?
Billions of dollars of Archegos's positions sold in 2 weeks on fire sale, dropping X% from 23-Mar to 01-Apr:
IQIYI (Ticker: IQ): -42.4% [$28.91 to $16.64]
Tencent Music (Ticker: TME): -36.7% [$31.79 to $20.11]
ViacomCBS (Ticker: VIAC): -51.1% [$91.25 to $44.64]
GSX Techedu (Ticker: GSX): -56.2% [$73.44 to $32.18]
Discovery Communications (Ticker: DISCA): -39.6% [$71.68 to $43.31]
Vipshop (Ticker: VIPS): -33.9% [$45.58 to $30.14]
Thoughts? Why aren't traders/investors buying those positions? Or are the shares purchased by Bill Hwang (ex-star in Tiger) that bad?
I thought the same thing, maybe investors were expecting more block sales? Most of those stocks were pretty frothy so maybe that is why but I still expected them to revert to their means or close to them.
those stocks only went up because Archegos was buying them..the high prices were ludicrous, and now the market knows why...they didn't deserve the high prices...they were artificial.
Yeah this is the exact reason. Since when do so-called "value" stocks like Viacom increase 700% in a year? Similar to how Soft Bank was behind the tech rally in the middle of last year, these prices were completely inflated due to Hwang constantly driving them up. Viacom does not deserve to be trading at 91. However, there could still be an opportunity to buy the dip if you believe its true value to be ~60. Just be careful, because there's a very good chance these could be complete value traps, or even worse, falling knives if we do see more chop or even a correction.
I see.. It's insane to see how a AUM$10b hedge fund can cause a doubling of share price in that many $10b++ firms. Is that the business model? That is:
Step 1: Leverage your AUM several times
Step 2: "Invest" in several companies that are of the size where you can effectively double the share price
Step 3: Slowly sell your shares to other market participants at the inflated prices
Step 4: Rinse & Repeat
-> Is the above even viable as a business model?
I'd be interested to see how the above companies' share prices pan out though - the companies' valuations look rather decent (at least in comparison with their competitors), and their business models remains fully intact despite the sell-off.
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