Update: Well, SVB stock never went live again, and four days on, the search for a buyer for SVB Bank continues. Now under the control of the FDIC, SVB Bank reportedly had a number of suitors over the weekend for a planned auction process including PNC Bank and the Royal Bank of Canada. But by Sunday, interest and urgency appeared to wane after the U.S. government said it would guarantee all deposits in the bank — a significant move, since when the bank collapsed on Friday, the vast majority of those deposits were above the $250k threshold insured by the FDIC, and uninsured by SVB itself. Now, according to a story earlier today from the WSJ, the FDIC is having another crack at an auction.
The difference this time around is that, because the firm’s failure has been deemed a threat to the financial system, it gives the FDIC the flexibility to add in more sweeteners to the deal to try to get it done, including potential offers to mitigate the buyer taking on full liabilities and losses, says the WSJ.
Meanwhile, the future SVB Financial — the holding company whose stock had been publicly traded before Friday — is inching into its next phase. It looks like it has a number of suitors for the rest of its business, including some big banks but also major financiers like Apollo (which incidentally also owns Yahoo, which in turn owns TechCrunch.) Read more of our SVB coverage here.
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Silicon Valley Bank Financial, the publicly traded holding firm of Silicon Valley Bank, has paused trading this morning pending an announcement. The latest, from the typically reliable market tracker Deltaone, is that it’s sent out a memo to employees advising them to work from home until further notice as it engages in “conversations to determine next steps for the bank.”
The notice comes on the heels of a report in CNBC earlier today saying that the firm is in talks to sell itself.
The developments are the latest troubling turns for the technology-focused lender in what has been a surprising, precipitous downfall.
SVB — the bank for many Silicon Valley startups and other power players in the sector — has grappled with a number of issues, all in quick succession: rising interest rates, mounting losses, messaging its state of affairs to the market and, most recently, a run on the bank, with a rush of customers pulling their money out.
CNBC did not identify the buyer. It reports that Silicon Valley Bank attempted to raise money from investors before exploring the sale but had been unsuccessful. No official word from the company.
The California-based lender spooked many of its customers on Wednesday after it announced its plans to offer $1.25 billion of its common stock to investors and a further $500 million of mandatory convertible preferred shares. General Atlantic said it had agreed to buy $500 million of the bank’s common stock in a separate private transaction, though that was contingent on the closing of the common stock offering, per its SEC filing. We have reached out to General Atlantic to ask for the latest status on that $500 million commitment.
It looked from the onset as if a lot of SVB’s woes stemmed from how SVB severely mishandled its news: namely, it released its plans for selling common stock just as another bank — the crypto bank Silvergate — was announcing that it was shutting down and liquidating. In support of that, a call led by its CEO Greg Becker yesterday to calm the market down repeatedly emphasized the company’s liquidity and solid position.
However, more recent reports point to unease behind the scenes for months about the state of SVB. Greenoaks warned portfolio companies back in November about the bank’s state of affairs, according to a report in Bloomberg. Some 12 of its portfolio companies had collectively withdrawn around $1 billion from SVB in recent months.
And as Connie pointed out yesterday, the fact that Silicon Valley Bank had failed to diversify its business in recent times was an issue hiding in plain sight, exacerbated not just by the current state of the economy but by the massive downturn that has hit the technology sector — SVB’s mainstay bread and butter — in particular.
Last but not least, there is also a cynical counter-view to put out here. SVB has, as of Q4 2022, $212 billion in assets, $342 billion in client funds, $74 billion in loans and presumably quite a lot of customers who are tied into banking there as part of the loan covenants. That’s a big business likely being eyed up by many rivals and by those who profit from making bets on crashes.
More to come, please refresh to update.