SVB in Talks to Sell Itself After Capital Raise Fails, CNBC Says
Comment of the Day

March 10 2023

Commentary by Eoin Treacy

SVB in Talks to Sell Itself After Capital Raise Fails, CNBC Says

This article may be of interest. Here is a section: 

SVB Financial Group is in talks to sell itself after attempts to raise capital amid a bank run failed, CNBC reported.

Large financial institutions are looking at a potential purchase of the company, CNBC said Friday.

SVB — 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 a large part of its available-for-sale securities.

The Santa Clara, California-based company took steps this week to shore up capital after being hit by losses on its securities portfolio and a slowdown in funding at the venture capital-backed firms it serves.

The stock, which tumbled 60% on Thursday, plunged as much as 69% early Friday in New York before trading was halted. The company’s bonds posted record declines, igniting a broad selloff in bank shares around the world.

Eoin Treacy's view

The demise of SVB which had a market cap of $40 billion and deposits of $173 billion in December has raised the spectre of deeper issues in the banking sector. SVB was lending to start ups and that business has been eviscerated by the run up in rates.

Most banks are not in that business line, but several pension funds are among the investors in the company. The extent to which other pensions have unrealised losses in venture/startup investments is where the risk of contagion is concentrated. In a crisis, you sell what you can, not what you wish. 

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