Leading global pure-play and Fortune 500 company Peabody received a $534 million margin call.
The Australian benchmark coal price is up more than 400% in the past 12 months, hitting $425.
Peabody was not prepared and got slammed with a $534 million margin call.
The sum is more than half the cash the company had at the end of December 2021.
Margin calls are beginning to happen left and right and we’re going to discuss it.
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Margin calls in the coming weeks
The Russian-Ukraine conflict is affecting global markets sparking margin calls in every corner of the finance sector.
Russia’s war in Ukraine has further fueled a rally in coal driven by a squeeze on global energy supplies.
Chinese tycoon Xiang Guangda is currently facing an $8 billion margin call after Nickel prices skyrocketed to $100,000 per ton.
Xiang Guangda tells banks he has no intention in reducing his positions.
The short seller is requiring a coordinated bank bailout including the participation of JP Morgan.
The London Metal Exchange halted trading in nickel on Tuesday morning after prices spiked as much as 250% in two days, driven by brokers rushing to close out short positions after holders of bearish bets struggled to make margin calls.
Credit Suisse News: Margin call tension rises
The Swiss bank Credit Suisse is also imposing margin calls on investors exposed to Russia.
The invasion of Ukraine has left wealthy individuals invested in Russian assets with frozen accounts and demands for more collateral.
Tension really began to pick up when Russia was removed from SWIFT.
Banks in the United States are losing cash quick.
Citigroup disclosed in its annual report that it has nearly $10 billion in exposures to Russian counterparties, including loans, reverse repo agreements and cash deposits.
Morgan Stanley’s next gen emerging markets fund (MFMIX) has also been exposed to Russia with nearly $16.6 million frozen due to Russian sanctions.
Schwab’s fundamental emerging markets large company index ETF (FNDE) has also been affected with 12.7% being exposed to the Russian stock market.
Peabody receives a 10% loan from Goldman
Peabody shares plunged 17% after announcing the margin call, taking a chunk out of the gains they had made in recent months as the coal market boomed.
Margin calls could increase if the coal market moves higher.
Senior VP for coal markets at Rystad Energy Steve Hulton says prices could reach $500 per ton.
Peabody arranged a $150 million credit line with Goldman Sachs although the bank announced in 2019 that it would phase out financing for coal.
Peabody’s margin call is only a glimpse of what’s coming to various institutions in the markets worldwide.
And in the states, retail investors are waiting for hedge funds’ number to be called.
Will banks be able to inject liquidity into hedge funds?
As banks and hedge funds’ assets continue to lose their value, will banks be able to inject liquidity into hedge funds when they need it?
Leave a comment below with your thoughts.
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Maybe these places shouldn’t have shorted… Let these HFs burn, why the hell should there be a bailout for them? Set a hard lesson for the rest of em
Peabody is in the coal industry but we’re beginning to see margin calls occur everywhere and it’s hurting many overleveraged businesses financially. Shorting is not the way. I don’t agree in bailouts either.
I stopped using big banks. Using local banks instead
I’m a dumb ape. I want to ask: When margin calls occur and hedge funds have to cover, what are the chances that the covering isn’t done in dark pools to prevent the share price from skyrocketing?
Lets go AMC we need some Margin calls . It’s time we make some money.
Peabody is one example of margin calls happening in the coal industry but with Credit Suisse margin calling investors, it’s only a matter of time before hedge funds are also hit.
Let’s start a discussion!