DISCA Stock Price: Discovery Communications suffers as part of rumoured Archegos liquidation
- Discovery shares suffered a steep fall on Friday due to rumoured hedge fund liquidation.
- DISCA shares closed at $41.90 for a 27% loss on Friday.
- The legacy media company was rumoured to be part of forced liquidation of Archegos positions.
Discovery Communications (DISCA) shares closed out a tumultuous week for the stock with further steep falls on Friday. In total DISCA shares dropped over 50% from high to low last week. Reports of large blocks of media shares being offered on Friday were circulated as traders tried to explain the large moves. ViacomCBS (VIAC), Discovery and related stocks suffered heavily on Friday.
Weekend reports by Bloomberg and the FT said Goldman Sachs sold over $10 billion worth of stocks in block trades, according to Reuters. CNBC reported that Archegos Capital Management was the reason for the forced block sales. IPO Edge broke the story.
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DISCA stock price
Discovery shares closed at $34.60 on Friday, a loss of 27.5%. VIAC shares also took a similar hit, closing down 27.3%.
The issue appears to be a concentration of positions taken by Archegos in a small number of stocks, according to Reuters. A move can become self-fulfilling in this case. Selling pressure comes on a stock. A client is requested to post extra margin by its investment bank to cover these losses. If the client cannot post the additional margin, the investment bank will sell the client's positions until it has sufficient margin to reduce its exposure. This appears to be the case here.
Other stocks have also been caught up in the block selling, with ViacomCBS and Baidu (BIDU) rumoured to be part of the forced liquidation. Baidu has fallen from $260 to $200 in the last three sessions. Discovery (DISCA) lost nearly 50% of its value last week and VIAC shares fell about 50% last week as well. Selling pressure intensified as the week progressed.
Investment bank shares are all suffering in European trading this morning. Credit Suisse warned of a hit to first-quarter results due to its exiting positions with a large US hedge fund. Nomura issued a similar statement.
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Author
Ivan Brian
FXStreet
Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.
