Silicon Valley Bank Extends 2-Day Crash As It Says It Is Seeking a Sale

  • Silicon Valley Bank crashed another 68% on Friday, extending its 2-day crash to 87%.
  • The bank failed to complete its $2.3 billion fundraising round and is now looking to sell, according to CNBC.
  • The news comes amid fears, with several venture capitalists advising their holding companies to take money out of the bank.

Shares of Silicon Valley Bank has experienced another crash Friday, dropping as much as 67% and extending its two-day implosion to 87% after CNBC’s David Faber reported that the bank is reportedly looking to sell itself after failing to complete its previously announced $2.3 billion capital raise.

“That capital raise that Goldman Sachs got into had failed. It’s not going to happen…they certainly didn’t seem to be timing particularly well in terms of crystallizing a loss and then exiting the market…separately, Silicon Valley Bank has hired advisers to seek a sale,” Faber reported.

“I’m told there are major financial institutions that have been watching this bank for some time, are considering at least taking a look. That doesn’t mean anything is going to happen,” Faber said.

THE Friday’s extended decline also came as fears of a bank run rose after several venture capitalists advised their holding companies to withdraw their deposits from the bank.

SVB Financial has always had a strong business relationship with start-ups looking to put their money somewhere, but now customer concentration is hurting them.

Peter Thiel’s Founder Fund advised its portfolio companies to withdraw their deposits on Thursday, as did Coatue Management, Union Square Ventures and Founder Collective, according to Bloomberg.

Y Combinator President and CEO Garry Tan told his network of thousands of start-ups the following: “Anytime you hear of solvency issues at a bank, and it can be deemed credible , you need to take it seriously and prioritize the interests of your startup by not exposing yourself,” according to a post viewed by Bloomberg.

But SVB Financial CEO Gary Becker told investors on Thursday to “stay calm” and added that the bank had ample liquidity.

The 2-day crash was triggered by SVB Financial after surprising investors after the market closed on Wednesday with lowered forecasts, a $2.3 billion capital raise and news that it lost $1.8 billion after selling a $21 billion portfolio of US Treasury securities.

SVB Financial has seen a surge in deposits in 2020 and 2021 as valuations of speculative tech companies and start-ups soared. The bank parked those deposits in fixed income securities that sported incredibly low interest rates.

After the Fed aggressively raised interest rates throughout 2022, these fixed-income securities lost a lot of value, and as valuations of tech companies and start-ups fell and deposits fell, the bank decided to bolster liquidity by selling a large portion of its available-for-sale bond securities.

The crash of SVB Financial on Thursday dragged down the entire banking sector, and now fears of a risk of contagion are starting to grow.

Shares of SVB Financial are down 95% from their November 2021 high of $763.22, with shares trading around $35 at the start of Friday trading.

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