The battered shares of many of the companies linked with Archegos Capital’s massive margin call bounced back on Tuesday, as investors bet the bulk of the selloff was done and took advantage of discounted prices.
Shares in ViacomCBS last traded up 3.9% at $46.79 after rising as high as $48.39 earlier in the session while Discovery Inc shares were up 6.9% at $44.09 after rising as high as $46.18.
Other stocks that were said to be caught up in the unwinding of Archegos included Tencent Music Entertainment Group, which was up 4.9% on Tuesday.
Vipshop Holdings was up 9.6% on Tuesday after falling 12% in the last two sessions.
Wall Street was counting the cost of the Archegos meltdown on Tuesday, with pressure piling up on Credit Suisse, while attention was turning to regulatory scrutiny that might result from banks unwinding the fund’s positions.
Both ViacomCBS and Discovery had fallen 27% on Friday as big blocks of shares in the companies were put on the market because banks were liquidating positions owned by the $10 billion family office run by former Tiger Asia manager Bill Hwang, according to sources.
“Investors have decided the selling is done and its safe to go back in the water,” said Chris Marangi, co-chief investment officer for value at Gabelli Funds, which holds shares in Discovery and was ViacomCBS’s second biggest holder of voting stock as of late January.
“The stocks cut in half are undeniably more reasonable than they were two weeks ago,” said Marangi.
Tuesday’s rally follows a wild ride that has taken shares of ViacomCBS and Discovery to record highs of $101.97 and $78.14, respectively.
ViacomCBS and Discovery are both now trading below their respective median price targets of $55 and $46.
CFRA analyst Tuna Amobi reiterated his ‘buy’ ratings for ViacomCBS and Discovery, which have fallen 54% and 43% from their highs, respectively. Still, he said the volatility in the stocks was likely to persist.
“I don’t think the overhang on the liquidation trade has fully dissipated. We don’t know if the trade has been fully unwound,” said Amobi.
Part of the issue is that as a family fund Archegos has not had to make the same disclosures about stock ownership as a regular fund, according to Amobi.
“That lack of information is creating the overhang,” he said. “All of that creates uncertainty around the duration of this external event.”