Duke G Profile picture
12 Sep, 26 tweets, 6 min read
Frustrated because you just blew up your $20,000 portfolio?

Well, how about a portfolio valued at $20 Billion?

Here’s the story on how Bill Hwang BLEW UP $20 BILLION in 2 days.

To start this story, who even is Bill Hwang?

Hwang, unbeknownst to most, was among some of the world's wealthiest individuals. He was a giant influence on financial markets, but almost no one had ever heard of him or the name of his firm- Archegos Capital Management!
How could one firm - Archegos - a family office, cause SO MUCH CHAOS?

Hwang would cause losses in total of $30 Billion. From $20 Billion of his own portfolio & $10 Billion of the banks money.
After college, his dream was in NYC, but he couldn't get hired at Goldman(ironic) or Morgan Stanley. He would end up taking a job at Hyundai Securities!

Turns out, he was a very good securities salesman there and caught the attention of Julian Robertson of Tiger Management.
Bill would become a ‘Tiger Cub’. The term used for former disciples of Julian. People that worked under Robertson had great success & were later able to spin out their own firm.

Hwang would leave the firm to start his own Hedge Fund- Tiger Asia & Robertson would seed the fund.
Tiger Asia would be extremely successful. At one point managing close to $10 Billion.

But, Tiger Asia was between aggressive and illegal trading. Regulators throughout the world accused the firm of insider trading & Bill would plead guilty for Hedge Fund on Wire Fraud.
He would also be forced to shutdown Tiger Asia.

Out of this, he would form the family office- ARCHEGOS CAPITAL MANAGEMENT.
Under the family office structure, he would take his own fortune, approximately $200 Million and hire his own analysts and do his own work. He was pretty successful, at first.
There was a couple things that would work well in his favor.

1. Invested in tech stocks- $AMZN, $FB, $GOOG to name a few
2. He would also start to increasingly use leverage
Borrowing a lot of money meant that his gains were intensified and he would continue to put the capital into the same bets. With these leveraged bets, he had taken $200 Million and turned it into a $20 Billion fortune in under 7 years.
During this time as well, Bill was steadfast in spreading the word of Christ.

Deep down, he believed that by investing in these companies, he was advancing society on behalf of God.
He felt that the positions and the double downs he was taking were a part of God’s plan. He didnt have hedges in place for any mistakes that could be made.
To make the story even more interesting. Hwang never lived large or in the spotlight. He had a small house in suburban New Jersey and drove a Hyundai SUV. Essentially a grown up version of a Wall Street Bets subscriber.
His strategy was to find a couple stocks, bet on it, double down, and not worry about anything else. He thoroughly believed the positions he was taking were all a part of the larger vision from God, which would eventually lead to his undoing.
So, where did this fiasco first start to unravel?

On March 22nd ViacomCBS- $VIAC announced a stock and convertible bond sale to raise $3 Billion.
Hwang had a large position in $VIAC & every time the stock would tick up he would continue to put more money in it as it went up.

Instead of helping the stock, the stock went down 9% and the following day would decline another 23%.
With the stock declining so quickly, it forced a margin call. The dealers he was contracted with would plead Hwang to sell some stock so he would survive.

He would take some losses, but live to see another day! Bull Hwang would refuse.
But the biggest problem was that it was multiple banks margin calling Hwang.

Suddenly, names that Bill had plowed Billions into were no longer moving in his direction & he had not implemented any effective hedge.
The banks started to panic after they loaned him a lot of money and demanded him to post more cash or risk his whole portfolio being liquidated.

Hwang would not have enough cash lying around and they would liquidate his entire portfolio of $20 Billion.
But wait, there’s more! It wasn't just his money, he risked the bank's money as well!

Credit Suisse lost $5.5 Billion
Nomura(Japan) lost $2.5+ Billion
Goldman Sachs, Wells Fargo, Deutsche Bank got out without losing
How could so many banks loan him that much?

Hwang was an invisible whale using swaps to remain unseen. Instead of his name on the leverage agreement documents, it's the firm you're dealing with that shows up.
With this, It's the banks that appear as the stockholders not Bill, while he profited off the moves.

This would be the end of Bill Hwang. Fortunately, he managed to not crash the entire financial system in the process as well.
Of course, Wall Street is no stranger to losing money, but this case is unique in financial history because of the size of positions 1 individual accumulated and speed at which it was destroyed.

This is one of the most astounding failures in modern financial history.

Sources: Bloomberg, Benjamin, WSJ, Financial times
If you liked this thread, give me a follow @chadsgx!

Maybe next time you'll think twice about YOLOing!!

Let me know your thoughts below!
@unusual_whales just made $20 bil today on NFT’s 🤝🤝🤌

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