Soros bought the dip on the shares that Archegos Capital liquidated
One of the biggest stories in Wall Street in 2021 was the liquidation of Bill Hwang’s Archegos Family office but as they margin called, George Soros was buying the same shares.
The capitulation of Archegos Family Office has been one of the largest shocks in the financial world in 2021 as in late March, the company had to liquidate and its trading accounts and holdings margin called as Viacom and Discovery share prices tumbled during this time.
The fund was no longer able to sustain these losses and the Prime Brokers who were holding their assets has to liquidate on their behalf and this included the likes of Goldman Sachs and Morgan Stanley.
But one interesting thing to emerge out of this chaos is that as the various banks and Prime Brokers sold off the shares in an attempt to cover the losses, George Soros was busy picking up the exact same shares that they were selling off in desperation.
The form 13F that has been submitted with the Securities and Exchange Commission (SEC) shows that Soros bought around $375 million worth of the major Archegos’ shareholdings during this period and this includes shares of Viacom and Discovery as well.
This seems to be the strategy of many of the large funds that have very good standing and on a strong base as they make use of such ‘imperfections’ that arise during times of great peril and they try and double down or triple down under such circumstances as long as the fundamentals support such calls.
In this, there lies a big lesson for companies and retail traders alike in FX and other financial industries as well as it shows that it is important to always have liquidity at their disposal and to bet on investments for the long term (as long as the outlook looks good) rather than look for short terms gains.
The idea is not to over-leverage on holdings and seek enormous loans and margin, like what Archegos did, but to plan for the long term and to plan for entries and exits with that in mind. As long as something is fundamentally strong and there is enough liquidity available, it is always a much better bet to buy and hold rather than try and buy something high in the hope of selling it even higher.
Though critics may say that it is improper that there are funds around that try to profit out of a panic situation, it is also a lesson for investors and traders to look at fundamentals and plan and build for the long term.