Filing Suggests Bill Hwang Profoundly Pressed Bet in Baidu (BIDU) in Days Before Collapse

March 30, 2021 12:05 PM EDT

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An interesting 13G filing on Baidu (NASDAQ: BIDU) may shed some light on how much Bill Hwang of Archegos was pressing his bets in the weeks before the funds' collapse on Friday due to margin calls.

The filing after the close of trading Monday from Morgan Stanley, a known Archegos brokerage firm, showed it held 115,126,744 ordinary shares, or 5.2% of BIDU, as of March 18. Translated into ADRs (8:1), this would equal 14,390,843 ADRs. This is more than a 3-fold increase in Morgan Stanley's position of 4,462,203 ADRs owned at the end of 2020.

The stake was worth $3.8 million on March 18, based on BIDU's closing price of $264.85. However, shares of BIDU quickly started moving lower in the days ahead. BIDU hit $239.19 on March 24, $204.57 on March 25, before the major selling occurred on March 26 which pushed shares to an intra-day low of $174.05.

You can see how quickly Hwang's collateral was eaten up by the stock moves if he was running a reported 5x leverage.

As an example, if you assume all of Morgan Stanley BIDU position was Hwang-related, he would have used $760 million in equity for the $3.8 billion stake. The 22.7% drop in BIDU from March 18-24 would have wiped out his entire equity in the stock, triggering a margin call to come up with more equity. Meanwhile, Hwang had similar positions spread out across Wall Street. When the margin clerks came calling, he simply didn't have the capital to put up, forcing the banks to liquidate the positions.

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