- Ackman called on the government for a “highly dilutive” bailout of Silicon Valley Bank if the private sector did not step in.
- The risk of bank failure could have a domino effect on the rest of the banking sector, he said.
- SVB is a benchmark bank and lender to tech startups and a crucial part of the ecosystem.
Billionaire investor Bill Ackman has said the US government should consider a “highly dilutive” bailout of Silicon Valley Bank amid concerns over its financial condition.
The bank’s failure “could destroy an important long-term driver of the economy, as venture capital-backed companies depend on SVB for lending and holding their operating cash,” Ackman said in a statement. series of tweets on Thursday. “If private capital cannot provide a solution, a government-preferred highly dilutive bailout should be considered,” he said.
—Bill Ackman (@BillAckman) March 10, 2023
Ackman, founder and CEO of hedge fund Pershing Square Capital Management, said a bank bailout should protect depositors rather than shareholders or its management. “We should not reward poor risk management or protect shareholders from risks they knowingly assumed,” he said.
He further stated that “The risk of failure and deposit losses here is that the next least well-capitalized bank faces a run and fails and the dominoes keep falling. That’s why the government intervention should be considered”.
—Bill Ackman (@BillAckman) March 10, 2023
Ackman’s tweets had been viewed 1.2 million times in their first five hours online.
On Thursday, the share price of the bank owned by financial group SVB fell more than 60% to $106.04 after said it faced a loss of $1.8 billion due to a $21 billion forced sale of its bond portfolio. To cover the losses, SVB wants to raise $2.25 billion by selling shares and issuing related securities.
The bank is in damage control mode now. Greg Becker, CEO of Silicon Valley Bank, told customers to “stay calm” during a conference call on Thursday, Bloomberg reported, citing a person familiar with the matter.
The events raised concerns among tech VCs and founders on the financial stability of Silicon Valley Bank. Some notables Venture capitalists advised their portfolio companies to withdraw their funds, which, in turn, increased the risk of a bank rush. In the worst case, this could leave the bank with too little cash for its operations.
SVB Financial Group shares extended losses on after-hours trading, falling 22% to $82.50 apiece. The title is down 54% since the start of the year.
Silicon Valley Bank did not immediately respond to Insider’s request for comment sent outside of normal business hours.