Silicon Valley Bank: Latest Developments
That Was The Week 2023, #8
Oh boy, what a day. 9 March 2023 will never be forgotten at Silicon Valley Bank.
The after-market share price fell to $77.78, a 71% decline from the previous closing price.
This week's curated stories below explain what happened. The short version is that the bank took some steps to strengthen its balance sheet and, in the process, baked in some losses from having placed customer funds into bond investments. The losses were about $1.8 billion. A large loss for the bank.
Adding fuel to the fire, SVB announced a capital raise from multiple sources, signaling a 30% dilution for existing investors.
The immediate impact on March 8th was a 20% or so decline in SVBs share price. By market opening, it had increased to 30% and is now at 71%. Friday will test whether this represents a bottom.
Meanwhile, in Palo Alto, the atmosphere is confused. Many venture funds called for calm. Others asked their companies to withdraw funds. As I write, it is impossible to withdraw funds from SVB due to system failures, so there are lines at the physical branches.
One thing, however, is certain. The bank leadership, aware of impending corrections, made some loss-making decisions that have stunned investors and resulted in panic share selling.
The fate of SVB is tied to the fate of many investors and entrepreneurs in Silicon Valley. It is also tied to the reputation of the Valley as a beacon of risk-taking and innovation.
Whether the bank survives through the efforts of its friends, is sold to a "white knight" buyer, or fails altogether is open to question.
SignalRank banks with SVB, and we have many friends there. We wish them the best as this plays out.
Enjoy this weeks reading, even though it may be challenging for those with a stake in the outcome.