NEW YORK, December 21, 2021 / PRNewswire / – Pomerantz LLP announces that a class action lawsuit has been filed against Goldman Sachs Group Inc. and Morgan Stanley on behalf of investors in Tencent Musical entertainment group (“Tencent“or the” Company “) (NYSE: TME). The class action, filed in United States District Court of the Southern District of New York, and registered as 21-cv-09564, is in the name of all investors who have purchased or otherwise acquired Tencent actions at the same time as the illegal transactions of the defendants of March 22, 2021 through and including March 29, 2021 (the “Remedy Period”), pursuant to Sections 20A, 10 (b) and 20 (a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 USC §§ 78t-1, 78j (b) , and 78t (a).
If you are a shareholder who purchased securities of Tencent during the Class Period, you have up to December 27, 2021 ask the court to appoint you as the principal plaintiff for the group. A copy of the complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at [email protected] or 888.476.6529 (or 888.4-POMLAW), toll free, Ext. 7980. Those inquiring by e-mail are encouraged to provide their mailing address, telephone number and the number of shares purchased.
[Click here for information about joining the class action]
Archegos Capital Management (“Archegos”), a family office investment fund, was founded and managed by Sung Kook Hwang (“Hwang”), a former portfolio manager of Tiger Asia Management, a hedge fund he also founded.
Goldman Sachs is a global financial services institution. Goldman Sachs has been one of Archegos’ main brokers, helping it with transactions and lending it capital in the form of a margin loan.
Morgan Stanley is a global financial services institution. Morgan Stanley was one of Archegos’ main brokers, helping it with transactions and lending it capital in the form of a margin loan.
Archegos described himself as focused on public actions in the United States, China, Japan, South Korea, and European. Its assets of approximately 10 billion dollars included the likes of ViacomCBS Inc. (“ViacomCBS”), Vipshop Holdings Ltd., Discovery Inc., Farfetch Ltd. (“Farfetch”), Gaotu Techedu, Inc., Baidu Inc. (“Baidu”), iQIYI Inc., and Tencent.
Archegos has taken large and concentrated positions in these companies through financial instruments known as “total return swaps”, in which the underlying securities (stocks) are held by banks which negotiate the investments. Swaps allow investors like Archegos to bet on fluctuations in stock prices, often with high leverage, without owning the underlying securities. Instead, banks buy and hold stocks and give the fund a return linked to performance. The fund secures transactions by giving the bank collateral, such as cash or stocks.
These swaps also allow investors to take huge positions while releasing limited funds up front, essentially borrowing from the bank, which in turn also allows investors to remain anonymous, although Archegos, for example, was estimated to have had an exposure to the economy of more than 10% of the shares of several companies. Since investors holding more than 10% of a company’s securities are considered insiders of the company and are subject to additional regulations regarding disclosures and earnings, these swaps have been particularly beneficial for Hwang.
In addition, Archegos used the leverage provided by its swap strategy to gain exposure to more than $ 50 billion value of securities. Again, this strategy was designed in part to allow Hwang to avoid margin limits and regulatory disclosure requirements.
Unbeknownst to investors and regulators, several large brokerage banks, including the defendants, had each simultaneously allowed Archegos to take billions of dollars of exposure to volatile stocks through swap contracts, increasing significantly the risk posed by these concentrated positions.
Hwang’s swap strategy began to backfire in March when the stock prices of companies in which Archegos had significant exposure, including Baidu, which saw its shares fall more than 20% from its highs. February, and Farfetch, which was down 15%, started selling.
However, it was a March 23, 2021 announcement from ViacomCBS which has finally swept the carpet under Archegos. That day, in what was seen as an effort to take advantage of the meteoric rise in stock prices, ViacomCBS announced a new $ 3 billion offering to help fund investments in its streaming service, Paramount +, which launched earlier this month.
According to subsequent reports citing people familiar with the matter, the announcement put a lot of pressure on Archegos, as news of the deal caused ViacomCBS’s share price to fall, adding to Archegos’ growing losses. In fact, according to the same report in The Wall Street Journal (published April 6, 2021), the fund had already started to sell part of its position in ViacomCBS in an attempt to offset the losses, which only increased pressure on the stock.
At March 24, 2021, ViacomCBS has evaluated this offer. 20 million shares of its class B ordinary shares were to be made available to $ 85 one share and 10 million shares of its 5.75% mandatory convertible preferred shares were to be made available to $ 100 sharing. In addition, the underwriters, led by the defendants (among others), would receive an option to purchase up to 3 million additional Class B shares and up to 1.5 million additional shares of shares. preferred convertible bonds. All in all, ViacomCBS is expected to increase $ 3.06 billion if both options were exercised.
Unfortunately, not everyone was convinced that ViacomCBS deserved such a high rating. For example, on March 25, 2021, one of Wall Street’s most influential research firms, MoffettNathanson, released a report questioning the value of the company, downgrading the stock to ‘sell’ and setting a price target of just $ 55 per share, compared to $ 85 to offer. “We never, ever thought we would see Viacom[CBS] trade near $ 100 by action “, we read in the report, written by Michael nathanson, co-founder of the company. “Obviously neither is ViacomCBS management,” he continued, citing the new share offering.
As a result of this report, ViacomCBS stock collapsed, losing more than half of its value in less than a week. Indeed, at market close on Friday March 26, 2021, ViacomCBS was worth $ 48 per share.
This turned out to be extremely problematic for Archegos, who had traded ViacomCBS on margin (that is to say., with borrowed money). Because Archegos had to maintain a certain amount of collateral to satisfy its lenders, and as the value of the ViacomCBS share dropped significantly, Archegos needed enough collateral to cover, or else a margin call (where the lender can force a sale of the stock to bring the investor back into line with the margin requirements), could be triggered.
At March 27, 2021, it was reported that Archegos did not cover and, therefore, had to liquidate more than $ 20 billion of its leveraged equity positions on Friday March 26, 2021.
The fallout from Archegos received wide media coverage in the days and weeks following the company’s remarkable liquidation for a number of reasons, including the fact that it resulted in some of the most esteemed financial institutions in the world. world in the mud at his side.
The complaint alleges that, throughout the Complaint Period, the Defendants sold a large number of Tencent actions during the week of March 22, 2021, while in possession of material non-public information. According to subsequent media reports, the defendants unloaded large block transactions made up of actions from the doomed bets of Archegos, including billions of Tencent titles, late Thursday 25 March 2021, before Archegos’ story reached the public, sending Tencent’s stock into a complete spin.
As a result of these sales, the defendants avoided billions of losses combined.
The Defendants knew, or were reckless in not knowing, that they were prohibited from trading on the basis of this confidential information on market developments, but nonetheless negotiated, disposing the Plaintiff and the other members of the Class their Tencent shares ahead of the news of Archegos and the fall in Tencent shares.
As a result, the Plaintiff and the Class have been harmed by Defendants’ violations of US securities laws.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, Paris, and Tel Aviv, is recognized as one of the leading firms in the areas of corporate, securities and antitrust litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class actions bar, Pomerantz was a pioneer in the field of securities class actions. Today, more than 85 years later, Pomerantz continues the tradition he established, fighting for the rights of victims of securities fraud, breach of fiduciary duty and professional misconduct. The firm has recovered numerous multi-million dollar damages on behalf of the members of the group. See www.pomlaw.com.
Robert S. Willoughby
888-476-6529 ext 7980
SOURCE Pomerantz LLP