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Archegos Collapse Exposes Disclosure Loopholes

archegos-collapse-exposes-disclosure-loopholes

The collapse of Bill Hwang’s Archegos Capital Management in late March took many investors and several banks by surprise when ViacomCBS Inc. and Discovery Inc.’s share prices tumbled. It turns out that some companies were also left wondering why their share prices whipsawed.

Executives at online lender LendingClub Corp. and digital streaming service fuboTV Inc. still aren’t sure if sudden swings in their stock were from banks unloading billions of dollars in Archegos investments—or if the drop was from something else entirely, according to people familiar with the matter.

Archegos had previously told executives at LendingClub and fuboTV that it was a big shareholder, said people familiar with the matter. But without the regular disclosures that investment firms typically make after they build up a sizable stake in a stock, those executives didn’t have a way to verify the ownership claim.

It might seem surprising that a company can’t pinpoint why its stock suddenly falls, but the Archegos meltdown shows how difficult it can be for executives to determine who owns their company’s stock and for what reason.

A chorus of companies and advocacy groups are calling on regulators to revise financial-disclosure guidelines, particularly around loosely regulated family offices such as Archegos and around the use of derivatives, investor bets linked to stock prices instead of the stocks themselves.

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