'Big Short' investor Michael Burry issues a grave warning after Silicon Valley Bank's stock rout: 'It is possible today we found our Enron'
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- 'Big Short' legend Michael Burry just compared Silicon Valley Bank to Enron.
- The bank's stock plunged 60% Thursday as its parent company offloaded shares after massive bond losses.
- Enron was a scandal-hit energy firm that collapsed in the early 2000s.
Michael Burry has weighed in on Silicon Valley Bank after its parent company's shares plunged 60% in a single day.
"It is possible today we found our Enron," the 'Big Short' investor said Thursday in a now-deleted Tweet, referencing the scandal-hit energy firm that collapsed during the early 2000s.
SVB Financial's stock price collapsed earlier on Thursday after the company said it would sell more shares to cover a $1.8 billion loss it incurred after completing a $21 billion fire sale of its bond portfolio.
Burry compared its situation to Enron – which filed for bankruptcy in 2001 after an accounting scandal and is often used by investors as a marker for a staggering fall in a company's stock price.
Enron collapsed as the dot-com bubble burst in the early 2000s, with the tech-heavy Nasdaq Composite index plunging 78% in just over two years.
Rising interest rates have hammered SVB's bond portfolio over the past year, with the Federal Reserve's aggressive policy tightening pushing yields on 2-year US Treasury notes above 5% this week. Bond prices fall when yields rise.
The bank's updated investor deck, which was filed Wednesday, showed that 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 yielded 4.5% in early-morning trading Friday – meaning prices have plummeted since SVB bought the bonds prior to 2022.
SVB Financial is also under pressure because of its business model of lending to venture capital and private tech companies, which tend to cash in their equity stakes through an Initial Public Offering (IPO).
Stocks entered a bear market in 2022, dampening enthusiasm for public listings and thus fueling a decline in SVB Financial's deposits.
Burry has taken a bearish stance on markets over the past few years and has repeatedly warned investors to prepare for a looming crash in stock prices.
In January, he warned that the start-of-year rally was unlikely to last with a one-word Tweet: "Sell."