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Home / Business / He established an investment company worth 10 billion U.S. dollars. It disappeared within a few days.

He established an investment company worth 10 billion U.S. dollars. It disappeared within a few days.

Until recently, Bill Hwang was one of Wall Street’s greatest (and perhaps least known) wealth. Then his luck ran out.

Mr. Huang is 57 years old and a senior investor. He manages US$10 billion through his private investment company Archegos Capital Management. He borrowed billions of dollars from Wall Street banks to establish huge positions in some U.S. and Chinese stocks. As of mid-March, Mr. Huang was the financial force behind the $20 billion ViacomCBS shares, which made him the sole largest institutional shareholder of the media company. But few people know his total risk exposure, because these stocks are mainly held through complex financial instruments created by banks called derivatives.

By the end of March, Viacom’s CBS stock fell sharply, and the situation changed after the lenders demanded their money. When Archegos was unable to pay, they confiscated their assets and sold them, which was one of the biggest implosions for investment companies since the 2008 financial crisis.

Almost overnight, Mr. Huang’s personal wealth shrank. This is a story as old as Wall Street itself, ambitious, clever, and when the timing is right, it can generate substantial profits-only to collapse immediately when the situation changes.

Wall Street historian Charles Geisst said: “The whole incident shows that the regulatory environment over the past few years is loose.” “Archegos is able to conceal its identity from regulators by using the best example of shadow transactions in banks.”

The bankruptcy of Mr. Huang’s company had a ripple effect. Two of his bank lenders revealed billions of dollars in losses. The share price of ViacomCBS fell by half in a week. Two people familiar with the matter said that the US Securities and Exchange Commission conducted a preliminary investigation of Archegos, and market observers called for stricter supervision of family offices, such as Mr. Huang’s family office. It is estimated that these family offices are private investment vehicles for the wealthy and are estimated to control trillions of dollars. In assets. Others have called for greater market transparency in derivatives sold to Archegos.

Mr. Huang declined to comment for this article.

He is a well-known story of America’s tattered wealth. Mr. Huang was born in South Korea and moved to Las Vegas in 1982 as a high school student. He only speaks a little English, and his first job was cooking at a McDonald’s on the Las Vegas Strip. Within a year, his father was a pastor and died. He and his mother moved to Los Angeles, where he studied economics at UCLA, but was distracted by the excitement of nearby Santa Monica, Hollywood, and Beverly Hills.

In a speech in 2019, he told his compatriots at the Promise International Fellowship (a church in Flushing, Queens): “I always blame the people who set up UCLA in such a nice community.” “To be honest, I can’t. Go to school so much.”

He said that he barely graduated and studied for an MBA at Carnegie Mellon University in Pittsburgh. He then worked for a South Korean financial services company in New York for about six years, eventually becoming an investment advisor to respected stock investor Julian Robertson, who was founded in 1980 by Tiger Management , Is considered a pioneer of hedge funds.

After Robertson closed the New York fund to external investors in 2000, he helped establish Mr. Huang’s own hedge fund Tiger Asia, which focused on Asian stocks and grew rapidly. It was once an external investment. The owner manages $3 billion in funds.

Mr. Hwang is known for his decisiveness. He used a large amount of borrowed funds (or leverage) to place large and concentrated bets on stocks in South Korea, Japan, China and other regions, which can increase his returns and eliminate his position.

His personal life is relatively modest. The house he and his wife Becky bought in the high-end suburb of Tenafly NJ, New Jersey, was worth about $3 million, which was rudimentary by Wall Street standards. Mr. Huang is a devout religious person and founded the Grace and Mercy Foundation, a New York-based non-profit organization that sponsors Bible reading and religious book clubs, and its assets from less than a decade of US$70 million Increased to 500 million US dollars. The foundation has donated tens of millions of dollars to Christian organizations.

John Bai, co-founder and managing partner of Fundstrat Global Advisors, a securities research firm, said: “He provided a ridiculous amount.” He has known Huang for about thirty years. “But he did it in a humble, modest, and non-exaggerated way.”

However, in his investment approach, he took risks, and his company clashed with regulators. In 2008, Tiger Asia suffered losses after the investment bank Lehman Brothers filed for bankruptcy during the height of the financial crisis. The following year, Hong Kong regulators accused the fund of using confidential information it received to trade some Chinese stocks.

In 2012, Mr. Huang reached a civil settlement with US securities regulators in another insider trading investigation and was fined US$44 million. In the same year, Tiger Asia pleaded guilty to federal insider trading charges in the same investigation and returned funds to investors. Mr. Huang was prohibited from managing public funds for at least five years. The regulator officially lifted the ban last year.

Soon after closing Tiger Asia, Mr. Huang opened Archegos, which was named after the Greek word for chief or prince. This new company also invested in US and Asian stocks, similar to a hedge fund, but its assets consist entirely of Mr. Huang’s personal wealth and the wealth of certain family members. Due to the lack of public investors, this arrangement protects Archegos from regulatory scrutiny.

Goldman Sachs, who lent him at Tiger Asia, initially refused to deal with Archegos. JPMorgan Chase, another “major broker” or large lender of a trading company, also did not participate. However, according to people familiar with the matter, as the company grows and its final assets exceed $10 billion, its temptation becomes irresistible. Archegos buys and sells stocks on two continents, and banks can charge considerable fees for the transactions they assist in arranging.

Goldman Sachs later changed course, and in 2020 became the company’s main brokers with Credit Suisse and Morgan Stanley. Nomura also works with him. JPMorgan Chase refused.

By the beginning of this year, Mr. Huang had already developed an interest in a few stocks: Viacom CBS (ViacomCBS) had high hopes for the nascent streaming service. Explore, another media company; and Chinese stocks including e-cigarette company RLX Technologies and education company GSX Techedu.

The transaction price was about $12 a year ago, and by January, the stock price of ViacomCBS rose to about $50. People familiar with the transaction said that Mr. Huang has been accumulating stocks, called “swaps” through complex positions arranged with banks, which gave him economic risks and benefits, but did not have actual ownership of the stocks.

An analysis of public documents by people familiar with the matter and the New York Times showed that by mid-March, as the stock price approached $100, Mr. Huang had become the largest institutional investor in ViacomCBS. People value this position at $20 billion. But because Archegos’ shares are backed by borrowed funds, if ViacomCBS’s shares are accidentally repurchased, he will have to pay the bank to make up for the loss or be liquidated quickly.

On Monday, March 22, Viacom CBS (ViacomCBS) announced a plan to sell new shares to the public. The transaction hopes to generate $3 billion in new cash to fund its strategic plan. Morgan Stanley is trading. The four people involved in the issuance said that as bankers communicate in the investor community, they expect Huang Guangyu to become a major investor and they will buy at least $300 million in stocks.

But at some point between the announcement of the transaction and the completion of the transaction on Wednesday morning, Mr. Huang changed his plan. The reason is not entirely clear, but both the Chinese e-cigarette company RLX and the education company GSX are circling the Asian market at the same time. His decision resulted in the fundraising work of ViacomCBS ending with $2.65 billion in new capital, which was much lower than the initial target.

Two people familiar with the matter close to ViacomCBS said that Viacom CBS executives did not know that Huang Guangyu had a huge impact on the company’s stock price, nor did he know that he cancelled the plan to invest in the stock offering until the stock offering was completed. The people said they were frustrated by this. At the same time, investors who obtained more than expected shares in the new share issuance and saw that they were not enough were selling the shares, which further pushed down its price. (Morgan Stanley declined to comment.)

As of March 25 (Thursday), Archegos was in serious condition. The plunge in ViacomCBS’s stock price is triggering a “margin call” or demand for additional cash or assets from its main broker because the company cannot fully meet the requirements. A person close to the company said that in order to buy time, Archegos held a meeting with lenders and asked to wait patiently because it was quietly unloading assets.

Those hopes were dashed. Goldman Sachs realized the impending failure and began selling Archegos’ assets the next morning, followed by Morgan Stanley, to recover their money. Other banks soon followed suit.

Last Friday, due to the influx of Viacom’s CBS shares into the market and the influx of ViacomCBS shares into the market, Mr. Huang’s wealth plummeted. Credit Suisse was slow to make up for the losses, so it announced that it could cause significant losses. Nomura Securities announced a loss of US$2 billion. A person familiar with the matter said that Goldman completed the liquidation but did not record a loss. Since hitting a high on March 22, ViacomCBS’s share price has fallen by more than 50%.

Hwang relaxed and only issued a brief statement, calling this a “challenging time” for Archegos.

Kitty Bennett Contributed research.

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