The woes of American banks? Silicon Valley Bank shares plunge a day after Silvergate fall

Fears grew this week over the future of yet another US bank after Silicon Valley Bank (SVB) announced a major asset and stock sale aimed at raising additional capital.

However, some investors may be concerned that all is not well at the tech startup and venture capital-focused bank, especially given the shutdown of crypto bank Silvergate just a day early. Shares of Silicon Valley Bank tumbled more than 60%, wiping out some $80 billion in value from the bank’s stock.

SVB is one of the 20 largest banks in the United States and provides banking services to companies like venture capitalists Sequoia and Andreessen Horowitz (a16z).

In a March 8 financial update, it revealed that it had sold $21 billion of its securities holdings for a loss of $1.8 billion to shore up its balance sheet.

It has also raised $500 million from venture capital firm General Atlantic and is looking to raise another $1.75 billion in sales of its shares, for a total of $2.25 billion.

He said the sale had gone through as he expected “continued rising interest rates, pressure on public and private markets and increased levels of cash burn by our clients as they invest in their businesses”.

The publication of the financial statements, however, caused SVB’s share price to fall by 60% on March 9, according to Google Finance, as investors worried about the bank’s financial situation. It also saw a further 23% drop in after-hours trading.

SVB’s five-day chart shows the sharp one-day price decline from around $265 to nearly $80 after hours on March 9. Google Finance

According to a March 9 report from The Information, SVB chief Greg Becker told investors to “stay calm” and said the bank had “enough liquidity to support our customers with one exception: if all everyone thinks that SVB is in trouble, it would be a challenge.

In a letter to stakeholders, Becker reaffirmed that the bank was “well capitalized”, with “one of the lowest loan-to-deposit ratios of any bank our size” and plans to reinvest capital from the sale in “more assets”. short-term sensitive securities”.

Many shared concerns about the potential ripple effect if SVB customers were to trigger a bank run.

On Twitter, however, the founders and tech executives voiced their support for the bank and urged others not to panic.

Mark Suster of Upfront Ventures tweeted on March 9 that “more members of the VC community need to speak out publicly to ease the panic over (SVB)”.

“I believe they could only fail if everyone panics, so I would ask for calm decisions based on facts,” he added.

Reacting to the news, Zak Kukoff, director of venture capital firm General Catalyst, said the bank had “constantly gone out of its way” for startups, adding that “now is the time to support them”.

Related: Silvergate’s downfall sparks debate over whose fault it really was

The uncertainty over SVB comes just a day after Silvergate said it would “shut down operations” and liquidate its cryptocurrency-enabled bank.

In a March 8 announcement, Silvergate Capital Corporation said the decision to close operations was “in light of recent industry and regulatory developments.”

Silvergate was a major banking partner for many crypto firms, but concerns about its creditworthiness emerged after news broke that it would delay filing its annual 10-K report by two weeks. The document provides an overview of a company’s financial situation.

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