Like a film, indeed more than a film. On Monday, March 24, Viacom CBS shares crossed the $100 threshold on Wall Street, breaking their record for the thirteenth time in March. In the space of three months, the value of the average company, which controls brands such as Paramount, has more than doubled. A euphoria justified by the launch of a streaming service, on the model of Netflix, which kicked off on March 4th. On the strength of this performance, however, Viacom itself celebrated its latest record by launching on the market the request for a loan of 3 billion dollars necessary to finance the attempt to compete with Netflix or Walt Disney, the streaming giants. And he took it badly.
Wall Street's "snipers" did not miss the opportunity to hit their prey downwards: -27% on the first day, -23% on the second, Wells Fargo issued a report on Friday morning that had the flavor of a conviction . But it was not the Hollywood major that was shot dead, but a family office, Archegos Capital, great and unknown “stoker” who fueled the purchases on ViacomCbs, but also another media company, Discovery, and a handful of Big Chinese, among which they stand out Baidu, and Tencent Music, the Shanghai giant that is buying Universal from Vincent Bolloré.
Let's forget Hollywood. Indeed not, because "margin call” is also the title of a film with Kevin Spacey shot on the occasion of the 2008/09 crisis. But since yesterday it is also the title of the most sensational crash in US financial history: a margin call from $20 billion gone up in smoke on Friday evening to the detriment of giants such as the Swiss credit and the Japanese Nomura, guilty of financing a certain man's dangerous bet Bill Hwang, former protégé of Julian Robertson, the legendary manager of the Tiger Fund. Hwang, who ran Tiger Asia to great fortune, gave Archegos Capital, wholly owned by his family with ten billion dollars in assets. A good sum, but not enough to satisfy his ambitions. And so, on the strength of his contacts (who doesn't give credit to a gentleman with those capitals...) Hwang launched the speculation that was to project him into the Olympus of the greats, through the margin call mechanism.
What is it about? When an operator, in addition to investing his own capital, borrows money from the broker to buy shares or other securities to amplify the speculative effect, margin trading takes place. When the loss of an investment exceeds a certain threshold, the broker has the right to ask for the reinstatement of the guarantee, beyond a certain margin. And in the absence of a payment, it clicks the right / duty to sell everything, regardless of the price.
It is as much as Mr. Hwang's counterparts, that is Goldman Sachs and Morgan Stanley, they did on Friday afternoon, demanding reinstatement of the position which had exceeded $30 billion. A massive sale of the securities involved followed. And it will not only be poor Hwang, a failed media tycoon, who probably aimed to do good business with the entertainment world in China, who will pay, but also the unfortunate lenders who have supported the speculator in various operations. These include Japan's Nomura, which lost $2 billion, and Crédit Suisse, which may have lost twice as much. But the victims are many more, probably including Deutsche Bank. In short, no one will want to smile today at the opening of Wall Street.
