- Big Short legend Michael Burry has just compared Silicon Valley Bank to Enron.
- Shares of the bank plunged 60% on Thursday as its parent company dumped stocks after massive bond losses.
- Enron was a scandal-hit energy company that collapsed in the early 2000s.
Michael Burry weighed in on Bank of Silicon Valley After shares of its parent company plunged 60% in a single day.
“It is possible today that we will find our Enron,” the “Big Short” investor said Thursday in a Tweet now deletedreferring to the scandal-hit energy company that collapsed in the early 2000s.
SVB Financial’s share price tumbled earlier on Thursday after the company announced it would sell more shares to cover a $1.8 billion loss it suffered after entering into a $21 billion fire sale of its bond portfolio.
Burry compared his situation to that of Enron – which filed for bankruptcy in 2001 after an accounting scandal and is often used by investors as a marker of a steep drop in a company’s stock price.
Enron collapsed when the dot-com bubble burst in the early 2000s, with the Nasdaq Compound index plunging by 78% in just over two years.
Rising interest rates have weighed on SVB’s bond portfolio over the past year, with aggressive Federal Reserve policy tightening pushing yields higher. 2-year US treasury bills above 5% this week. Bond prices fall when yields rise.
The banks updated investor platformwhich was filed Wednesday, showed the company’s $21 billion bond portfolio had a yield of 1.8% and an average duration of just over three years.
The 3-year US Treasury note returned 4.5% in early Friday morning, meaning prices have fallen since SVB bought the bonds before 2022.
SVB Financial is also under pressure due to its business model of lending to private venture capital and technology companies, which tend to cash in their stakes through an initial public offering (IPO).
Shares entered a bear market in 2022, dampening enthusiasm for public listings and thus fueling a drop in deposits from SVB Financial.
Burry has taken a bearish stance in markets over the past few years and has repeatedly warned investors to brace for an impending stock price crash.
In January, he warned that the rally at the start of the year was unlikely to last with a One-word tweet: “Sell”.
Learn more: Here’s how the collapse of Sam Bankman-Fried’s FTX empire compares to other corporate bankruptcies like Lehman Brothers and Enron