By Nithusa Sinnadurai
The financial world continues to unravel the puzzling mystery surrounding 57- year old Bill Hwang; the renowned investor who lost $20 billion in two days.
Hwang’s financial career propelled when he landed a job as an investment advisor for the investment firm Tiger Management. During his time there, Hwang had the opportunity to work with esteemed stock investor Julian Robertson. In the early 2000s, Robertson was the one who guided Hwang into starting his own hedge fund. Tiger Asia was the final product as focused on mainly Asian stock that exponentially grew. At a certain point in time, the fund was managing nearly $3 billion for outside investors. Tiger Asia had been successful for the most part, however, there were certain times such as when the firm lost approximately $2 billion, that Robertson stepped up to reassure and remind employees “to live with losses”. Hwang embraced this mindset, especially when it came to his investing approach.
Due to the bankruptcy caused by the investment bank Lehman Brothers in 2008, Tiger Asia had to close its doors after losing all of its money. It wasn’t too long before that the Tiger Cub himself launched his new firm; Archegos. This time, Hwang set his focus on investing in both U.S. and Asian stocks by using his own personal assets along with a couple of family members. Since Hwang was using his own wealth and the absence of public investors, he was protected from facing regulatory criticisms.
At the beginning of 2021, Hwang prioritized his stocks on ViacomCBS and Discovery; a multinational streaming service, RLX Technologies; an e-cigarette company, and GSX Techedu; an education company. ViacomCBS’s stock price skyrocketed from $12 a share to $50, and Hwang’s stake kept growing due to his curated relationship with banks. The investor conducted trading also known as “swaps” to give him more economic exposure and return on the stock, but never actually held ownership of these stocks. Once the stock had reached a value of $100 per share, Hwang was declared the “largest institutional investor in ViacomCBS”. On March 22, ViacomCBS reported its plan to sell new shares to the public with the hope of generating approximately $3 billion. Within 2 days of this announcement, ViacomCBS’s stock prices started falling rapidly and Archegos required to return funds to its prime lenders. Hwang’s inability to return funds lead to the mass financial chaos: Credit Suisse, one of Archego’s biggest lenders, lost nearly $4.7 billion, Nomura Holding Inc. losing around $2 billion, and so on.
According to Bloomberg, what makes this loss so drastic was the complete preventability of it, reporting, “it was an entirely preventable disaster made possible by Hwang’s lenders. Had they limited his leverage or insisted on more visibility into the business he did across Wall Street, Archegos would have been playing with fire instead of dynamite.” Despite the Tiger cub’s strong mindset to “live through losses”, the loss of $20 billion will definitely be a struggle to surpass.