SVB Financial Group — which until this week banked almost half of all US venture backed startups — continued its freefall on Friday as the company’s silence about a planned capital raise further spooked investors. The company — which for months has been adamant that it wouldn’t significantly restructure its balance sheet — stunned investors Wednesday when it said it would issue $2.25 billion of shares and booked a $1.8 billion loss on the sale of substantially all of its available-for-sale securities. After shares of the company plummeted 60% on Thursday, analysts began questioning if the capital raise would even occur. “What was likely planned to be nothing more than a portfolio restructure and capital raise has turned into a painful vortex of a lack of information along with a healthy dose of misinformation and questions on deposit flow,” Jon Arfstrom, an analyst at RBC Capital Markets, said in a note to clients. He noted the plummeting share price will likely mean the bank will have to issue even more shares, further diluting the stock if the transaction even does occur.
Behind the scenes, Silicon Valley Bank executives have rushed to reassure clients even as prominent venture capitalists advised their portfolio businesses to withdraw money. Some customers complained they were unable to make withdrawals on Thursday. “There is clearly one set of reactions which is let’s move our money and, to be clear, the reason for that is why wouldn’t you looking at a cost-benefit analysis why would you not look to de-risk exposure,” Eileen Burbidge, a partner at Passion Capital Investments, said in an interview with Bloomberg Television. NN: The only question is does this bank that will fail spread losses up the food chain. Asshole bankers living in zero interest rate world do not understand never mind how to hedge inflation driven interest rate risks. That is why they are blowing blue sky up our asses claiming the fed is done raising rates. As you will see as the Fed continues to raise rates they will fail. and welcome to the world of the next banking crises.
SVB falls 20% premarket, hurts bank shares globally
After cratering over 60% on Thursday, SVB Financial Group continued to fall, losing more than 20% in premarket trade on Friday. Concerns about SVB’s issues potentially spilling over to the entire global banking sector affected other lenders, which were the worst performers on most stock exchanges all around the world. Earlier this week, SVB announced it had sold approximately $21 billion of securities for an after-tax loss of around $1.8 billion. The lender that primarily backs technology start-ups also revealed it will sell a total of $2.25 billion of its common and depositary shares, with equity firm General Atlantic buying $500 million of common stock. SVB’s shares dropped 23.19% in the premarket.