SVB Financial Group Shares Plunge 60%, Bill Ackman Calls for Government Bailout
Shares of SVB Financial Group, the parent company of Silicon Valley Bank, plummeted 60% on Thursday after the bank announced a $1.8 billion loss on the sale of securities, and a plan to raise $2.25 billion of new capital.[0] Wall Street analysts are trying to assuage fears of contagion, saying the issues at SVB Financial are highly idiosyncratic, and unlikely to be replicated among other regional banks.
Billionaire hedge fund manager Bill Ackman floated the idea of a government bailout for the bank, after comparing its situation to the 2008 collapse of Bear Stearns.[1] He said in a series of tweets that SVB may require a bailout and called on the US government to to step in to protect customers' deposits and prevent damage to the bank's tech startup clients.[2]
SVB Financial CEO Greg Becker on Thursday urged venture capitalists to “stay calm” in a conference call, and asked for their trust.[3] “I would ask everyone to stay calm and to support us just like we supported you during the challenging times,” he said.[4]
The bank is deeply embedded in the US startup scene, as the only publicly traded bank focused on Silicon Valley and tech startups.[5] Startups are facing yet another obstacle in the already demanding funding landscape due to the lender's difficulties.[6]
In response to rising interest rates, the bank sold a $21 billion bond portfolio at a $1.8 billion after-tax loss, and is now seeking to raise new capital through a share sale. An offering of $1.25 billion in common shares and a $500 million mandatory convertible sale are included in the sale.[6] General Atlantic, an investor in growth equity, has agreed to buy $500 million of SVB shares in a private offering.[6]
Venture capitalists including Peter Thiel's Founders Fund have advised portfolio companies to pull money from Silicon Valley Bank, adding to the financial pressures and leading to the plunge in the bank's stock price.[7] Analysts from Wall Street mentioned on Thursday and Friday that SVB's issues were unlikely to become a widespread problem for the banking sector.[8]
The yield on the 10-year Treasury decreased by 5 basis points to 3.92%. The two-year Treasury yield dropped 16 basis points to 4.9%, and the six-month T-bill yield decreased 3 basis points to 5.28%.
0. “Bank Stock Selloff Triggered by SVB Financial Liquidity Crunch” Morningstar, 10 Mar. 2023, https://www.morningstar.com/articles/1143298/bank-stock-selloff-triggered-by-svb-financial-liquidity-crunch
1. “Silicon Valley Bank shares plunge, Ackman advises government bailout” Fox Business, 10 Mar. 2023, https://www.foxbusiness.com/markets/silicon-valley-bank-shares-plunge-ackman-advises-government-bailout
2. “Stock trading halted; Silicon Valley Bank tumble sends financial tremblor through tech industry” CBS News, 10 Mar. 2023, https://www.cbsnews.com/sanfrancisco/news/breaking-stock-trading-halted-silicon-valley-bank-tumble-sends-financial-tremblor-through-tech-industry/
3. “Silicon Valley Bank CEO Tells VC Clients to ‘Stay Calm'” The Information, 10 Mar. 2023, https://www.theinformation.com/articles/silicon-valley-bank-ceo-tells-vc-clients-to-stay-calm
4. “‘Too big to fail’ is back as Bill Ackman says government should consider a Silicon Valley Bank bailout” Fortune, 10 Mar. 2023, https://fortune.com/2023/03/10/bill-ackman-twitter-silicon-valley-bank-bailout-startups
5. “Is There a Run on Silicon Valley Bank? Is SVB FDIC Insured? What We Know so Far” Bloomberg, 10 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-10/why-svb-was-hit-by-a-bank-run-and-where-it-could-lead-quicktake
6. “Silicon Valley Bank's liquidity crisis rocks the tech world” PitchBook News & Analysis, 9 Mar. 2023, https://pitchbook.com/news/articles/silicon-valley-bank-vc-startup-liquidity-problems
7. “Dow Jones Futures Fall With Jobs Report Due After S&P 500 Sell-Off; SVB Financial Still Crashing | Investor's Business …” Investor's Business Daily, 10 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-sp-500-breaks-support-as-svb-financial-slams-bank-stocks-jobs-report-due/
8. “Silicon Valley Bank Financial in talks to sell itself after attempts to raise capital have failed, sources say” CNBC, 10 Mar. 2023, https://www.cnbc.com/2023/03/10/silicon-valley-bank-financial-in-talks-to-sell-itself-after-attempts-to-raise-capital-have-failed-sources-say.html
