May 21, 2024

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American banking problems? Silicon Valley Bank shares fell one day after Silvergate fell

American banking problems?  Silicon Valley Bank shares fell one day after Silvergate fell

Concerns about the future of another US bank escalated this week after Silicon Valley Bank (SVB) announced a major sale of assets and stocks with the aim of raising additional capital.

However, some investors may be concerned that not all is well with the tech startup and venture capital-focused bank, especially given the closure of crypto bank Silvergate just a day earlier. Shares in the Silicon Valley bank collapsed more than 60%, wiping out about $80 billion from the value of the bank’s stock.

SVB is one of the 20 largest banks in the US and provides banking services to the likes of cryptocurrency-friendly venture firms Sequoia and Andreessen Horowitz (a16z).

On March 8 fiscal to updaterevealed that it sold $21 billion worth of its securities holdings for a loss of $1.8 billion to prop up its balance sheet.

It also raised $500 million from General Atlantic, and is seeking to raise another $1.75 billion from sales of its stock, for a total of $2.25 billion.

It said the sale was made because it expects “continued high interest rates, pressure on the public and private markets, and high levels of cash burn from our customers as they invest in their businesses.”

However, the release of the financial statements sent SVB’s share price down 60% on March 9, according to Google Finance, with investors worried about the bank’s financial position. It also saw a further decline of 23% in after-hours trading.

SVB’s five-day chart shows a sharp one-day price drop from around $265 to nearly $80 in the after-hours of March 9th. Source: Google financing

According to March 9 a report From The Information, SVB head Greg Baker told investors to “remain calm” and said the bank has “enough liquidity to support our clients with one exception: If everyone was telling each other SVB was in trouble, that would be a challenge.”

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in a stakeholder letterBaker reiterated that the bank is “well capitalized”, having “one of the lowest loan-to-deposit ratios of any bank of our size” and expects to reinvest capital from the sale into “more asset-sensitive, short-term” securities.

Many shared concerns about the potentially harmful impact if SVB agents instigated the bank’s operation.

However, the founders and tech executives on Twitter expressed their support for the bank and urged others not to panic.

Marc Soster of Upfront Ventures chirp On March 9, “More in the VC community need to speak out to calm the panic [SVB]. “

He added, “I think they can only fail if everyone panics, so I will urge calm decisions based on the facts.”

In response to the news, General Catalyst’s director of risk, Zak Kokoff, said the bank has “consistently done its best” for the startups, adding that “now is the time to support them.”

Related: The fall of Silvergate sparks debate about who was actually at fault

The uncertainty over SVB comes just a day after Silvergate said it would “wind down operations” and liquidate its crypto-friendly bank.

In a March 8 announcement, Silvergate Capital Corporation He said The decision to close operations was made “in light of recent industry and regulatory developments.”

Silvergate has been one of the main banking partners of several crypto firms but concerns about its solvency arose after announcing that it would delay filing its annual 10-K report by two weeks. The document provides an overview of the company’s financial condition.