SVB Financial Group – the bank’s parent – lost much of its value Thursday after announcing plans to raise up to $1.75 billion to strengthen its financial position amid concerns about higher interest rates and the economy. The SVB news dragged Bank of America, Citigroup and others along with it, though they had stabilized by premarket Friday.
Trading in SVB was halted Friday before the bell after shares continued to slide another 60% in off-hours trading.
Triangle venture fund ‘pulling money out’ of Silicon Valley Bank
Meanwhile, CNBC reports that SVB Financial Group is “in talks to sell itself” after attempts to raise capital failed.
SVB Financial Group (Nasdaq: SIVB) told investors it had to sell $1.75 billion in shares at a loss in order to cover rapidly declining customer deposits. That move wiped out some $10 billion of the bank’s valuation, according to The Information.
Top Triangle investor says several clients likely to withdraw funds at Silicon Valley Bank
Its stock plummeted to $106.04 from more than $160.
Shares fell another 40% to $59.98 in pre-market trading Friday.
SVB maintains an office in Raleigh and has long been an active part of the Triangle and North Carolina entrepreneurial economy.
Silicon Valley-based SVB shares tumbled after CEO Greg Becker said the bank could be dealing with problems for some time to come.
‘Calls started coming and started panic’
In a conference call that The Information reported about Becker said that “calls started coming and started panic.”
Becker added SVB has “ample liquidity to support our clients with one exception: If everyone is telling each other SVB is in trouble, that would be a challenge.”
“I would ask everyone to stay calm and to support us just like we supported you during the challenging times,” he said, according to the report.
According to a letter “seen by Reuters,” Becker wrote: “While VC (venture capital) deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted.”
The assurances may have had limited impact.
‘Rushing to wire money out’
“Ultimately, none of that stopped people — at least the ones I spoke with — from rushing to wire money out of their SVB accounts on Thursday, fearful of being too late and seeing their startups crash and burn,” reported news site Semafor.
The SVB news helped trigger losses across the banking sector and concern that the Federal Reserve’s interest rate hikes are preventing banks from raising capital.
Bank stocks fell by their largest levels in nearly three years on Thursday, bringing all three major indexes down with them.
The Dow closed lower by 543 points, or 1.7%. The S&P 500 fell by 1.9% and the Nasdaq Composite was down 2.1%.
Shares of JPMorgan Chase dropped by 5.4%, Bank of America fell 6.2%, Wells Fargo was down 6.2% and Citigroup was 4.1% lower.
When interest rates were near zero, large banks scooped up Treasuries and bonds. Now, as the Federal Reserve hikes rates to fight inflation, those bonds are worth much less and banks are sitting on the losses. For SVB, which said it is partnered with nearly half of all venture-backed tech and health care companies, cash-hungry startups are feeling the pinch.
Investors were also rattled ahead of Friday’s key employment report from the Labor Department, which they hope will provide some clarity on the Fed’s next policy moves.
