Morgan Stanley (MS) Sold $5 Billion in Archegos' Stocks a Day Before Widespread Panic, Could Have Lost $10 Billion as the Biggest Stock Holder

April 7, 2021 6:18 AM EDT

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Morgan Stanley (NYSE: MS) got rid of a huge block of Archegos' stocks a day before the widespread selling started, CNBC reports.

The investing banking giant sold about $5 billion in shares from Archegos' aggressive portfolio late Tuesday, March 25, to a group of hedge funds. The bank reportedly had a consensus of Bill Hwang, head of Archegos, to get rid of these stocks.

However, buying hedge funds weren’t told that much more shares were available and that the offered block was only the beginning of the Archegos fiasco. All these hedge funds knew is that these shares, offered at a discount, were part of a margin call that could prevent the collapse of an unnamed client.

Media outlets reported that Hwang and his prime brokers convened on Thursday night to attempt an orderly unwind of his huge positions. Morgan Stanley and Goldman Sachs (NYSE: GS) were able to quickly sell shares and avoid losses measured in billions of dollars. Goldman managed to sell over $10 billion in Archegos-related stock on Friday.

“It was a gigantic clusterf--- of five different banks trying to unwind billions of dollars at risk at the same time, not talking to each other, trading at wherever prices were advantageous to themselves,” one industry source said.

On the other hand, Credit Suisse (NYSE: CS) lost $4.7 billion while Nomura projects its losses at roughly $2 billion. Morgan Stanley was reportedly the biggest prime broker of Archegos with about $18 billion in positions overall. Preliminary calculations show MS could have lost about $10 billion from the Archegos fallout.

“I think it was an ‘oh s---’ moment where Morgan was looking at potentially $10 billion in losses on their book alone, and they had to move risk fast,” a source told CNBC.

The report notes that Morgan Stanley got rid of a vast majority of shares by Friday, with the final 45 million shares of ViacomCBS (NASDAQ: VIAC) sold on Sunday.



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