Doubts about the future of another United States bank have risen this week after Silicon Valley Bank (SVB) announced a significant sale of assets and shares with the aim of raising additional capital.
However, some investors may be concerned that all is not well at the tech startup and VC-focused bank, especially Closure of crypto bank Silvergate Just a day before Shares of the Silicon Valley bank plunged more than 60%, wiping out about $80 billion worth of the bank’s shares.
SVB is one of the top 20 largest banks in the United States of America and provides banking services to those who prefer crypto-friendly venture firm Sequoia and Andreessen Horowitz (a16z).
In the March 8 financial UpdatesIt disclosed that it sold $21 billion worth of its securities for a loss of $1.8 billion to strengthen its balance sheet.
It also raised $500 million from venture firm General Atlantic and is seeking to raise $1.75 billion in the sale of its shares, 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 increased cash levels from our customers as they invest in their businesses.”
However, the financial release marked a 60% drop in SVB’s share price on 9 March. According to Google Finance, with investors concerned about the financial condition of the bank. It also saw a decline of 23% in after-hours trading.
as of March 9 reports By information, SVB chief Greg Baker asked investors to “remain calm” and said the bank had “enough liquidity to support our customers with one exception: If everyone is telling each other that SVB is in trouble, it will be a challenge.”
in a stakeholder LetterBaker confirmed that the bank was “well-capitalised”, with “one of the lowest loan-to-deposit ratios of any bank of our size” and that the capital from the sale would be “more asset-sensitive, short-term”. Securities.
Many have shared concerns about potential knock-on effect If SVB’s customers were to be instigated to run the bank.
On Twitter, the founders and technical executives, however, extended their support for the bank and appealed to others not to panic.
Mark Suster of Upfront Ventures Tweeted on March 9 that “more people in the VC community need to speak out publicly to calm the panic [SVB],
3/ I believe the biggest risk to startups and VCs (and to SVBs) will be a widespread panic. The classic “run on the bank” hurts our entire system. People are making fun of it in public. This isn’t a joke, it’s serious. please take it as
— Mark Suster (@msuster) March 9, 2023
“I believe they can only fail if everyone panics, so I would urge calm decision-making based on facts,” he said.
Responding to the news, Zak Kukoff, principal at VC firm General Catalyst, said the bank “consistently goes out of its way” for startups, adding that “now is the right time to support them.”
I would say – SVB has consistently gone out of its way to do the right thing for startups and the ecosystem. now is the right time to support them
— Zak Kukoff (@zck) March 9, 2023
Connected: Silvergate downfall sparked debate over whose fault it really was
Uncertainty remains over SVB just a day after Silvergate said it would “cease operations” and liquidate its crypto-friendly bank.
In a March 8 announcement, Silvergate Capital Corporation Said The decision to cease operations was “in light of recent industry and regulatory developments”.
Silvergate was one of the major banking partners for several crypto firms, but concerns about its solvency emerged following an announcement that it would delay the filing of its annual 10-K report by two weeks. The document provides an overview of the company’s financial position.