SVB extends 2-day plunge to 86% on report it will seek a sale after failing to raise capital
Lucas Jackson/Reuters
- Silicon Valley Bank crashed another 68% on Friday, extending its 2-day crash to as much as 87%.
- The bank failed to complete its $2.3 billion capital raise and is now seeking a sale, according to CNBC.
- The news comes amid fears of , with several VCs advising their portfolio companies to pull money from the bank.
Shares of Silicon Valley Bank experienced another crash on Friday, falling as much as 67% and extending its two-day implosion to 87% after CNBC's David Faber reported that the bank would seek to sell itself after it failed to complete its previously announced $2.3 billion capital raise.
"That capital raise that Goldman Sachs had embarked on had failed. It's not going to happen... they certainly didn't seem to time it particularly well in terms of crystallizing a loss and then going out to the market... separately, Silicon Valley Bank has hired advisors to seek a sale," Faber reported.
"I am told that there are large financial institutions who looked at this bank for some time, who are at least considering taking a look. It doesn't mean anything will happen," Faber said.
The extended decline on Friday also came as fears of a run on the bank grew after several venture capital firms advised their portfolio companies to pull their deposits from the bank.
SVB Financial has always had a strong business relationship with start-up firms that are looking to park their cash somewhere, but now that customer concentration is hurting them.
Peter Thiel's Founder Fund advised its portfolio companies to pull their deposits on Thursday, as did Coatue Management, Union Square Ventures, and Founder Collective, according to Bloomberg.
The president and CEO of Y Combinator, Garry Tan, told its network of thousands of start-up companies the following: "Anytime you hear problems of solvency in any bank, and it can be deemed credible, you should 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 has plenty of liquidity.
The 2-day crash was sparked by SVB Financial after it surprised investors after the market close on Wednesday with lowered guidance, a $2.3 billion capital raise, and news that it lost $1.8 billion after it sold a $21 billion portfolio of US Treasury securities.
SVB Financial saw a surge in deposits in 2020 and 2021 as valuations for speculative tech and start-up companies soared. The bank parked those deposits in fixed income securities that sported incredibly low interest rates.
After the Fed aggressively hiked interest rates throughout 2022, those fixed income securities lost a lot of value, and as valuations for tech and start-up companies fell and deposits dropped, the bank decided to shore up liquidity by selling much of its available-for-sale bond securities.
The crash in SVB Financial on Thursday dragged down the entire banking sector, and now fears of contagion risk are starting to grow.
Shares of SVB Financial were off 95% from its November 2021 record-high of $763.22, with shares trading at about $35 in pre-market trading on Friday. The stock has since been halted pending news.