- Discovery Communications is one of the companies caught up in the Archegos fund liquidation.
- DISCB shares rocketed on Wednesday.
- DISCA shares, the "normal ones," hardly budged.
Discovery was one of the stocks caught up in the recent Archegos liquidation rumours as Discovery (DISCA) shares dumped from near $78 to close last Friday at $41.90.
Archegos is a hedge fund/family office that is reported to have taken large positions in certain TMT stocks (tech, media, telecom). Archegos is reported to have failed to meet a margin call from one of its investment bank account holders, and this resulted in a domino effect as multiple banks began liquidating positions across a number of related stocks.
Stay up to speed with hot stocks' news!
DISCB stock news
IPO Edge broke the news last Friday that the sharp price moves in some TMT stocks, VIAC and Discovery (DISCA) in particular, were tied to Archegos Capital Management. Several investment banks warned of losses from an unnamed US client on Monday before the market opened. Credit Suisse and Nomura both made such statements on Monday and other investment banks were also under investor scrutiny to see if they were affected.
The situation took a fresh twist on Wednesday as Discovery B shares rallied nearly 80%, moving from $75 to over $150 before closing up 83% at $128.
DISCA and DISCB are heavily correlated shares as the chart shows. But this DISCB spike happened once before back on May 1, 2020. DISCB shares spiked 68% on May 1, 2020, again for no apparent reason. Discovery issued a release after the huge move, saying it was unaware of the reasons, and DISCB shares quickly returned to normal levels.
DISCB has a tiny free float (amount of shares available for trading). About 321k shares out of a free float of 6.51 million trade, according to data from Refinitiv. This makes it more volatile if interest and volume increases.
These are lightly traded shares held almost entirely by media tycoon John Malone, according to Factset. The B shares, DISCB, usually see volume around 3,000 shares per day. Volume on Wednesday was over 1.3 million shares.
DISCB shares have different voting rights compared to the more regular DISCA shares, with DISCB carrying ten votes per share as opposed to the DISCA shares carrying one vote.
DISCA stock price
Market participants were busy trying to find reasons for the move on Wednesday with various hypotheses (guesses!) being put forward. Talk of an arbitrage between the A and B shares gone wrong or retail traders driving the move were the main reasons given. The arb theory seems unlikely, given the tiny volume in the B shares, making any arb more difficult. Retail traders certainly were all over DISCB on social media with it being one of the top trending tickers across the usual stock social media sites. The move may also have been triggered by the recovery in DISCA shares on Tuesday when they closed up 5.5% and had been up nearer 10%. As the DISCB shares are correlated these also jumped on Tuesday by over 20%. This may have been flagged on several breakout systems and retail traders jumped in accordingly. The lack of liquidity then exaggerated the move.
Whatever the reason, traders should exercise extreme caution here. Discovery A shares have been trying to recover but are still merely back to where they were in January. The move in the B shares seems way overdone.
At the time of writing, the author is long DISCA and VIAC shares. The author has no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
This article is for information purposes only. The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice. It is important to perform your own research before making any investment and take independent advice from a registered investment advisor.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to accuracy, completeness, or the suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. The author will not be held responsible for information that is found at the end of links posted on this page.
Errors and omissions excepted.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD consolidates near 1.1350 amid a quiet start to a Big week
EUR/USD keeps its range play intact near 1.1350 in Monday’s European session. The upbeat market mood and easing US Dollar demand fail to provide lift to the main currency pair amid a quiet start to a critical week ahead.
GBP/USD recaptures 1.3300 as US Dollar buying stalls
GBP/USD has picked up fresh bids and regained the 1.3300 mark in the European trading hours on Monday. A pause in the US Dollar advance and a mildly positive risk sentment help the pair recover ground. However, the technical outlook on the daily time frame suggests a weakening bullish trend.
Gold price hangs above $3,265-3,260 support amid receding safe-haven demand and mildly positive USD
Gold price sticks to its bearish bias for the second successive day on Monday and trades just above the $3,265-3,260 pivotal support during the first half of the European session. Despite of mixed signals from the US and China, the optimism over the potential de-escalation of trade tensions between the world's two largest economies turns out to be a key negative factor.
Monero Price Forecast: XMR soars over 50% amid rising demand for privacy coins
Monero (XMR) price is extending its gains by 50% at the time of writing on Monday, following a 9.33% rally the previous week. The main reason for XMR’s rally is speculation that the token, which is widely known for its status as a privacy coin, was used to launder a suspected theft involving 3,520 BTC worth $330.7 million.
Week ahead: US GDP, inflation and jobs in focus amid tariff mess – BoJ meets
Barrage of US data to shed light on US economy as tariff war heats up. GDP, PCE inflation and nonfarm payrolls reports to headline the week. Bank of Japan to hold rates but may downgrade growth outlook. Eurozone and Australian CPI also on the agenda, Canadians go to the polls.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.