A hedge fund pointed out the ridiculousness of a New Jersey deli trading at a $100 million valuation. Now the newly minted meme stock is popping as trading volumes explode.

Your Hometown Deli
  • A New Jersey deli with a $100 million valuation flew under the radar until Greenlight Capital’s David Einhorn pointed to the company as a sign of excess in his quarterly letter.
  • Prior to Einhorn’s letter, Hometown International was a rarely traded stock on the over the counter exchange.
  • But with increased attention from Einhorn’s letter, trading volume in Hometown International is surging, only adding to the absurdity that Einhorn was trying to emphasize.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

To Greenlight Capital’s David Einhorn, Hometown International represented just one of many signs of excess that’s been building in the stock market over recent months.

Hometown, which owns a single deli in New Jersey and recorded annual revenue of just $14,000 in 2020, sports a market valuation of about $100 million. The stock had mostly flown under the radar since it went public in late 2019, rarely trading hands on the over the counter exchange with daily average volume of a few hundred shares.

That is, until Einhorn mentioned Hometown International in his quarterly letter.

“The pastrami must be amazing,” Einhorn quipped. He pointed to Hometown as the kind of company that amateur stock-pickers could lose their money in, and called for regulators to do more to protect investors.

Einhorn’s observation did little to deter trading in the thinly-held stock, whose single largest shareholder acts as CEO, CFO, treasurer, one of its directors, as well as the local high school wrestling coach.

Instead, the stock has moved higher on an explosion in trading volume.

Since the release of Einhorn’s letter, Hometown International surged as much as 17% to a record high of $15.75 on Monday. The move higher was accompanied by a 5,906% surge in daily trading volume.

On Friday, 42,762 shares traded, well above its one-year average daily trading volume of just 712 shares. And on Monday, more than 12,000 shares had exchanged hands as of 2:33 pm ET.

Einhorn’s spotlight on Hometown International didn’t deter the type of risky trading behavior that’s been seen in GameStop and Dogecoin this year, instead it exacerbated it.

Read more: A 29-year-old self-made billionaire breaks down how he achieved daily returns of 10% on million-dollar crypto trades, and shares how to find the best opportunities

Read the original article on Business Insider

Morgan Stanley sold $5 billion in Archegos’ stocks just before wave of sales hit rivals, report says

Barclays Traders NYSE
Traders work on the floor of the New York Stock Exchange.

  • Morgan Stanley sold about $5 billion in shares that Archegos Capital had to unload, with the sales made the night before a massive securities sale, CNBC reported Tuesday.
  • Sources told CNBC the investment bank didn’t tell the buyers that the shares it was selling would be the start of an unprecedented wave of securities sales by some investment banks.
  • Archegos collapsed after Wall Street banks forced the firm to sell more than $20 billion worth of shares after failing to meet a margin call.
  • See more stories on Insider’s business page.

Morgan Stanley sold about $5 billion in shares of now-collapsed hedge fund Archegos Capital Management the night before a massive securities sale took place, CNBC reported Tuesday, citing unnamed sources familiar with the matter.

Archegos’ biggest prime broker sold shares in US media and Chinese tech names to a small group of hedge funds late Thursday, March 25, the report said, adding that Morgan Stanley sold the shares at a discount and told the hedge funds that they were part of a margin call that could prevent the collapse of an unnamed client.

According to the report, sources said the investment bank didn’t tell the buyers that the basket of shares would be the start of an unprecedented wave of tens of billions of dollars in securities sales by Morgan Stanley and five other investment banks starting the next day, on Friday.

The sources told CNBC that Morgan Stanley had Archegos’ consent to shop around its stock late March 25.

European lender Credit Suisse said Tuesday it will likely suffer a $4.7 billion charge to first-quarter profits after Archegos failed to meet its margin requirements.

Bill Hwang, who in 2013 founded Archegos as a family office, used borrowed money to make large bets on some stocks until Wall Street banks forced the firm to sell more than $20 billion worth of shares after failing to meet a margin call.

Read the original article on Business Insider

Credit Suisse warns of a $4.6 billion charge after Archegos blow-up – and says several top executives are leaving

Credit Suisse

Credit Suisse warned on Tuesday it expects to suffer a $4.6 billion charge to its first-quarter profits following the failure of a US-based hedge fund to meet its margin requirements.

The European lender sees an overall loss of $958 million for the first quarter after two significant crises this year. The Archegos blow-up led to major losses for the bank’s unit that services hedge funds, according to media reports. Prior to that, Credit Suisse terminated $10 billion of supply-chain finance funds linked to troubled financier Lex Greensill.

“The Board of Directors has launched two investigations, to be carried out by external parties, into the supply chain finance funds matter and into the significant US-based hedge fund matter,” the bank said in a statement.

It has now proposed a cut to its dividend and waived bonuses for the 2020 financial year. Further, Chairman Urs Rohner is giving up his “chair fee” of 1.5 million francs ($1.6 million).

Credit Suisse CEO Thomas Gottsein will remain at the bank’s helm. But the lender’s chief risk officer, Lara Warner, is departing on Tuesday. The head of its investment bank, Brian Chin, will leave by the end of April. Joachim Oechslin has been appointed as Warner’s interim replacement, while Christian Meissner will take over Chin’s role.

Insider has learnt that Paul Galietto, head of equities sales and trading, is also stepping down. He will be temporarily replaced by Anthony Abenante, global head of execution services.

Thomas Grotzer, who previously served as general counsel and an executive board member, has been appointed as the bank’s global head of compliance with immediate effect.

Archegos Capital, the highly-leveraged family office of former “Tiger cub” Bill Hwang, triggered a $20 billion forced liquidation of its holdings last month. Archegos had borrowed from a host of banks including Goldman Sachs, Credit Suisse, and Nomura using leverage – or buying stocks on credit.

The fund collapsed after bets it made in stocks such as ViacomCBS, Tencent, and Baidu tumbled below a certain level, leaving its bankers with collateral that wasn’t worth as much. Its lenders, fearing that Archegos could default on its margin obligations at any moment, exited their positions.

“The significant loss in our Prime Services business relating to the failure of a US-based hedge fund is unacceptable,” Gottstein said in a statement. “In combination with the recent issues around the supply chain finance funds, I recognize that these cases have caused significant concern amongst all our stakeholders.”

Read the original article on Business Insider

Carl Icahn names a former GE executive as CEO of Icahn Enterprises: WSJ

FILE PHOTO: Billionaire activist-investor Carl Icahn gives an interview on Fox Business Network's Neil Cavuto show in New York, U.S. on February 11, 2014.  REUTERS/Brendan McDermid/File Photo
Carl Icahn.

  • Billionaire fund manager Carl Icahn has named Aris Kekedjian as CEO of Icahn Enterprises, the WSJ reported.
  • Kekedjian, who will assume the CEO post on Monday, previously spent three decades at GE.
  • See more stories on Insider’s business page.

Billionaire fund manager Carl Icahn has named a former General Electric executive as CEO of Icahn Enterprises, the Wall Street Journal reported Sunday.

In an interview with the Journal, the activist investor said Aris Kekedjian will take over as CEO and chief operating officer on Monday. Kekedjian spent three decades at GE, and was the company’s chief investment officer until 2019, the Journal reported.

Icahn Enterprises current CEO, Keith Cozza, and chief financial officer, SungHwan Cho, are leaving the firm, which consists of Icahn’s investment fund and other companies he controls, the WSJ said.

Icahn told the newspaper the pair of top executives were leaving on excellent terms. The decision was partly precipitated because neither planned to relocate to the Miami area, where Icahn Enterprises moved last year, he said.

In 2019, Icahn told staff he was shutting down offices in New York and opening up in early 2020 in Miami. Those who stayed with the company received moving expenses. Those who didn’t want to move to Florida got severance, Reuters and the New York Post reported.

Over the past year, a number of other powerful tech titans and Wall Street heavyweights have also made the move to Florida, drawn by lower taxes and other perks. Remote work during the COVID-19 pandemic also spurred some companies and powerful individuals to consider the move.

Icahn Enterprises did not immediately respond to Insider’s request for comment about Kekedjian.

Read the original article on Business Insider

Goldman beat Nomura to the punch during the Archegos liquidation – and then downgraded the Japanese bank’s stock

GettyImages 526244118
Goldman Sachs was quick off the mark in selling Archegos’ holdings

  • Goldman Sachs managed to sell its Archegos positions quicker than others, including Nomura.
  • Its analysts then downgraded Nomura’s stock after the Japanese bank flagged a potential $2 billion hit.
  • One market analyst said the Archegos affair showed the “cutthroat nature of the business.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Goldman Sachs was quicker than its rivals at offloading billions of dollars of stock held by the imploding investment fund Archegos. Japanese banking giant Nomura wasn’t so fast, according to reports, and is facing losses of around $2 billion in one of its arms.

Now, Goldman analysts have downgraded Nomura’s shares, pronouncing on Tuesday: “We now think upside for the stock looks limited.”

The analysts, led by Shinichiro Nakamura, also lowered their earnings forecasts for Nomura, saying: “We assume the company would look to adopt a generally more risk-focused or cautious approach.”

The major banks that lent to Archegos Capital Management tried to reach an agreement last week when it became clear that Bill Hwang’s fund was struggling to come up with cash to cover its bets, according to reports in the Financial Times and Bloomberg.

Yet those talks broke down, the reports said, and Goldman started selling huge blocks of Archegos’ holdings in companies such as ViacomCBS on Friday, causing stock prices to tumble.

Michael Brown, senior market analyst at Caxton FX, said it was a case of “every bank for themselves.” He added: “Unsurprisingly, [any agreement] quickly fell apart, such is the cut-throat nature of the business.”

On Monday, it became clear Nomura had not been fast enough when it said it was facing “a significant loss arising from transactions with a US client.”

Goldman, itself the heart of the action, swiftly downgraded Nomura’s stock from “buy” to “neutral” on Tuesday.

“We lower our [earnings] estimates given Nomura’s March 29 disclosure that it could book losses/provisions [of] approximately $2 billion,” the analyst said.

Nomura Holdings was down around 19% for the week on Wednesday at 581 Japanese yen, roughly $5.25. Goldman’s new 12-month target price is 630 yen.

Goldman said that if losses in the bank’s prime brokerage business rise to $3-$4 billion, “we would see a possibility that the company could rein in shareholder distributions.”

Nomura and Goldman Sachs both declined to comment.

JPMorgan now reckons the losses at certain banks involved with Archegos, such as Nomura and Credit Suisse, could be as high as $10 billion.

A person with knowledge of the situation said Goldman had “proactively managed” its risk and that its losses were “immaterial.”

Brown said: “For now, it’s a point to GS in this one.”

Read the original article on Business Insider

Mohamed El-Erian says the Archegos blow up is a ‘one-off’ but it may lead to tightening financial conditions as banks become more cautious

Mohamed El-Erian
Mohamed El-Erian, Chief Economic Advisor of Allianz and Former Chairman of President Obama’s Global Development Council, speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 1, 2017.

  • Mohamed El-Erian said the Archegos blow-up is a “one-off” in a CNBC interview Monday.
  • The Allianz chief economic adviser added he doesn’t believe it will lead to a “fast-moving contagion” in the markets.
  • El-Erian did warn investors about “tightening financial conditions” if banks become more cautious as a result.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Mohamed El-Erian says the Archegos blow-up is a “one-off,” but it may lead to a tightening of financial conditions as banks become more cautious.

Over the weekend reports came out that showed Archegos Capital Management had been behind roughly $20 billion worth of block sales of companies like ViacomCBS and several Chinese tech stocks including Tencent and Baidu.

The sales came after the hedge fund failed to meet margin calls from Credit Suisse, Nomura, and Goldman Sachs.

Queen’s College President and Allianz chief economic advisor told CNBC on Monday that he believes the incident was a “one-off,” caused by Archegos’ “highly concentrated positions”, “massive leverage”, and “derivative overlay on top of that.”

El-Erian said that he doesn’t see a “fast-moving contagion” spilling over and creating a significant market sell-off, adding that “for now it looks contained.”

The Allianz chief economist did say investors should be keeping an eye on “slower-moving contagion forces” which might cause a “tightening in financial conditions” forcing banks to become more cautious.

“There’s been so much liquidity sloshing around the system that there has been excesses and we’ll get fender benders like this one, but what we don’t want is a pile-up, and that’s why it’s really important to look at these slow-moving contagions,” El-Erian said.

El-Erian said he hoped the Archegos blow-up would lead to “better discipline in the marketplace because we’ve lost a lot of discipline.”

He added that Archegos’ positions, overall, are a “small” portion of the market, but said it could cause banks to make changes.

“I can tell you that in a lot of investment houses right now, and banks, people are being asked look how we are positioned, who are we exposed to, do we have enough margin, is the collateral moving or not, and all that causes somewhat of a slowdown in the system,” El-Erian said.

When asked what caused Goldman Sachs to force the liquidation when it did, the Queen’s College President said that “price action”, “how big was the margin overall”, and desire to move first and catch other banks “offsides” was the reason Goldman made its liquidation call.

Goldman Sachs told Bloomberg that its losses from the Archegos liquidation were “immaterial” while Nomura and Credit Suisse both face “significant” losses after the blow-up.

Read the original article on Business Insider

Something weird just went down in the stock market, and Wall Street is speculating it’s the result of a fund liquidation

Trader
Traders work during the closing bell at the New York Stock Exchange (NYSE) on March 18, 2020 at Wall Street in New York City

  • A selling spree on Wall Street erased $35 billion from the values of stocks of major companies Friday.
  • The selloff appears to be in part the result of the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported.
  • Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, Bloomberg reported.
  • See more stories on Insider’s business page.

A selling spree erased $35 billion from the stock values of major Chinese tech and US media companies Friday, and Wall Street is speculating it was in part driven by the forced liquidation of an investment firm’s holdings.

Shares of ViacomCBS and Discovery fell as much as 35% Friday, while US-listed shares of China’s Baidu, Tencent Music, Vipshop and others also plunged this week. The selloff came as the broader US market ended the week higher, with the Dow closing up over 450 points, buoyed by optimism over the pace of coronavirus vaccinations.

The selloff in the Chinese internet ADRs and US media shares was in part due to the “forced liquidation of positions” held by Archegos Capital Management, CNBC reported, citing a source familiar with the situation.

Archegos describes itself as a family investment office focusing on equity investments primarily in the US, China, Japan, Korea and Europe. Archegos is run by Bill Hwang, the founder of the now defunct Tiger Asia Management. Hwang’s fund is “known for employing leverage,” IPO Edge reported.

The group did not immediately respond to Insider’s request for comment and its website appeared to be offline on Saturday.

Goldman Sachs and Morgan Stanley liquidated large holdings this week, the news site IPO Edge was first to report, adding that the two investment banks have ties to Archegos. The move likely came after Archegos was unable to meet a margin call by an investment bank, CNBC and IPO Edge reported, citing sources familiar with the matter.

Bloomberg reported Saturday that Goldman Sachs liquidated $10.5 billion worth of stocks in block trades, where banks look to find buyers for big stock positions. The block trades included $6.6 billion worth of shares of Baidu, Tencent and Vipshop before the US market opened on Friday morning, Bloomberg reported, citing an email to clients.

Goldman then sold $3.9 billion worth of shares in media giants ViacomCBS and Discovery, as well as luxury fashion retailer Farfetch, and others, according to the report.

Goldman Sachs did not immediately respond to Insider’s request for comment.

Morgan Stanley also led share offerings on behalf of an undisclosed shareholder or shareholders, Bloomberg reported. Some of the trades exceeded $1 billion in individual companies, Bloomberg reported, citing its own data.

Read the original article on Business Insider

The 24-year-old founder of 2 crypto hedge funds overseeing $100 million admits to fraud

Worried trader
  • A 24-year old founder of two cryptocurrency hedge funds pleaded guilty to securities fraud on Thursday.
  • The two hedge funds had more than $100 million in assets, according to a Department of Justice statement.
  • The founder embezzled almost all of the capital to pay for personal expenses, including a penthouse apartment.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The founder of a cryptocurrency hedge fund that claimed to use a trading algorithm to capitalize on price differences in a number of crypto assets plead guilty to securities fraud on Thursday.

Stefan He Qin, a 24-year old Australian national, admitted in court that he embezzled nearly all of the assets raised in his two hedge funds, Virgil Sigma Fund LP and VQR Multistrategy Fund LP. The combined assets of the two funds were more than $100 million, according to a Department of Justice statement.

Qin used the assets raised in his two hedge funds to pay for his own personal expenses, including a penthouse apartment.

Prosecutors said that Qin stole investor money from his Virgil Sigma Fund and tried to pay back investors in his first fund with the assets raised from investors in his second multistrategy fund.

“The whole house of cards has been revealed, and Qin now awaits sentencing for his brazen thievery,” Audrey Strauss, the acting US Attorney for Manhattan, said in the statement.

The house of cards lasted for years as Qin made misrepresentations and false promises to lure new investors into his funds. 

Marketing materials for Virgil Sigma claimed that the strategy was profitable in every single month from August of 2016 to today, except for March of 2017. 

Qin ultimately faces a prison sentence of as long as 20 years. 

In a statement, Qin’s lawyers said, “Mr. Qin has accepted full responsibility for his actions and is committed to doing what he can to make amends.”

Read more: Market wizard Michael Kean has averaged a 29% annual compounded return since starting his company 10 years ago. He shares his unique stock-picking strategy and 4 pieces of advice for anyone who wants to become a trader.

Read the original article on Business Insider

A hedge fund made $700 million on its GameStop investment but bailed after Elon Musk’s ‘Gamestonk’ tweet

The Bull of Wall Street
r/WallStreetBets weren’t the only ones to make money off of GameStop.

The Reddit-fueled market mania that sent GameStop and other heavily-shorted stocks soaring last month has often been described as a perfect example of retail investors sticking it to the Wall Street establishment.

But not everyone on Wall Street was betting against GameStop.

New York-based hedge fund Senvest Management started investing in GameStop before it caught fire with much of the r/WallStreetBets crowd, and by October 2020, it owned more than 5% of the company, The Wall Street Journal reported Wednesday.

Senvest paid under $10 for most of its shares, and after GameStop stock peaked at more than $400, the hedge fund walked away with a $700 million profit, one of the biggest winners, according to The Journal.

By contrast, Reddit user r/DeepF—ingValue, who has largely been credited with igniting the GameStop rally, claims to have made a $48 million profit.

Read more: The investing chief at a $200 million hedge fund that earned 300% on its Bed Bath & Beyond trade says the GameStop mania is ‘just the beginning’ – and shares another stock that he believes will similarly spike

While Senvest got in on GameStop after a compelling presentation by its new CEO George Sherman and the involvement of investor and Chewy founder Ryan Cohen, it got out because of a tweet fired off by Elon Musk, The Journal reported.

On January 26, after the market closed, Musk simply tweeted “Gamestonk!!

Musk’s tweet helped extend the short-squeeze, sending GameStop’s stock surging another 157% when the market reopened the following morning.

Read more: One chart shows how Elon Musk can create a huge amount of wealth with just his Twitter

“Given what was going on, it was hard to imagine it getting crazier,” Senvest CEO and fund manager Robert Mashaal told The Journal.

Many hedge funds have been hit hard by the recent market frenzy. But even GameStop short-seller Melvin Capital, one of the biggest losers with losses of 53% in January, eventually got a $2.8 billion bailout from other hedge funds.

Meanwhile, GameStop’s stock had already dipped back down to around $92 on Wednesday, and reports are emerging of retail investors who bought in late and have already lost massive sums.

 

Read the original article on Business Insider

Hedge fund billionaire and New York Mets owner Steve Cohen left twitter after GameStop backlash

steve cohen
Hedge fund manager Steven A. Cohen, founder and chairman of SAC Capital Advisors.

  • Steve Cohen is the founder of Point72 Capital, a $17.2 billion hedge fund, and owner of the New York Mets. 
  • In a press statement, Cohen announced that he’s deactivating his Twitter account after his family received threats amid the GME buying frenzy led by Redditors. 
  • Cohen’s hedge fund lost nearly 15% this year and has since been under fire for its involvement with Melvin Capital, another hedge fund that betted against GameStop. 
  • Visit Insider’s homepage for more stories.

Steve Cohen, the hedge-fund billionaire and owner of the New York Mets, has deactivated his Twitter account, saying on Saturday his family received threats amid a Reddit-fueled buying frenzy of GameStop stocks. 

“I’ve really enjoyed the back and forth with Mets fans on Twitter which was unfortunately overtaken this week by misinformation unrelated to the Mets that led to our family getting personal threats,” Cohen wrote in a press statement. “So I’m going to take a break for now. We have other ways to listen to your suggestions and remain committed to doing that.”

Cohen and his $17.2 billion-worth hedge fund Point72 Capital came under scrutiny for their involvement with Melvin Capital Management, another hedge fund that betted against GameStop and the Robinhood frenzy. 

Point72 lost nearly 15% this year as individual investors drove the videogame retailer’s shares up. The company’s losses are predominantly a result of its $2.75 billion investment in Melvin Capital. 

On Thursday, Barstool Sports’ founder Dave Portnoy got into a Twitter argument with Cohen and slammed the Mets owner for helping Melvin Capital buffer its losses.

“You bailed out Melvin cause he’s your boy along with Citadel. I think you had strong hand in today’s criminal events,” Portnoy tweeted at Cohen.

 

In response to critics, Cohen denied his involvement with brokers that halted trading and enforced buying restrictions. He told Portnoy that he’s “just trying to make a living.” 

Cohen’s Twitter account was deactivated on Friday night. 

“I love our team, this community, and our fans, who are the best in baseball,” Cohen wrote in the press statement. “Bottom line is that this week’s events in no way affect our resources and drive to put a championship team on the field.” 

Read the original article on Business Insider