Executives at SVB Financial, the parent company of embattled Silicon Valley Bank, are in talks to sell the company, CNBC reported Friday, citing unnamed sources. SVB Financial’s stock fell nearly 60% on Thursday after it announced a plan to raise more than $2 billion in capital to cover losses at Silicon Valley Bank targeted at its startup. From that level, after the stock took a haircut from $268 to $106 per share, it looked set to fall another 65% in pre-market trading on Friday morning, before. trade stalled as reports swirled of a bank run.
“It’s not good now and there’s a lot of panic,” a venture investor who has spoken to several SVB clients and asked to remain anonymous, said. luck Thursday.
The unnamed source said CNBC that SVB Financial’s attempts to raise funds to shore up its balance sheet have been unsuccessful and the bank has hired advisers to explore a potential sale. However, the sources added that a large bank run has occurred, and the deposit flows are challenging the efforts of potential buyers to realistically assess the bank’s condition.
Silicon Valley Bank is known for lending to higher-risk tech and crypto startups, with more than half of its relations involving venture-backed US companies. But with rising interest rates and inflation proving stubborn, along with some surprising explosions for venture capital in the bear market and crypto winter of 2022, the sector has suffered. Bank deposits fell sharply as rising rates hurt the value of SVB’s bonds and loans, and a sudden surge in withdrawals on Thursday prompted SVB’s CEO Greg Becker to hold a Zooming venture firms call that afternoon, The information reported. “We have been supporting you and your startups for 30 years. We ask now not to panic,” he said. Instead they ran towards the exit..
Silicon Valley capitalists are concerned about the fallout from the bank’s issues, arguing that they are vital to the fabric of the startup industry.
Becker, seeking to allay fears about “a run” at his bank, also sent emails seen by luck says that “SVB is well capitalized” and “has a high-quality, liquid balance sheet.” But the credit rating agencies Moody’s and S&P Global both downgraded SVB Financial’s debt to just one notch above junk rating after news of its capital raising broke, citing a “weak funding profile.”
Silicon Valley Bank’s issues also led to a widespread sell-off in financial services stocks on Thursday as investors fear contagion, with the four largest US banks. lost $52 billion of the market cap in one day. And billionaire investor Bill Ackman Warned Thursday that the failure of Silicon Valley Bank could “destroy” the VC space, which is a “long-term driver of the economy.” He argued that the bank was “too big to fail” and the government should step in to save the day if necessary, raising the specter of the 2008-era. contagion in the financial services space that caused the Great Financial Crisis.
“If private capital cannot find a solution, a more dilutive government bailout should be considered,” Ackman Tweet.
SVB did not immediately respond luckThis is a request for comment.
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