Coin Edition -
- Silicon Valley Bank’s Stocks fell by nearly 60%.
- The bank sold off a $21 billion bond portfolio for a significant loss to shore up liquidity.
- SIVB’s debacle links to the challenges currently faced by the tech industry.
Cathie Wood, founder, CEO, and CIO at ARK Invest, is skeptical about the survival of the Silicon Valley Bank, SIVB, after its stocks fell by nearly 60%. The falling stock’s price contributed to a loss of over $80 billion, forcing the bank to sell off a $21 billion bond portfolio for a significant loss to shore up liquidity.
"Do you think $SIVB survives?" @SullyCNBC asks @CathieDWood. pic.twitter.com/kfM3tD695c— Last Call (@LastCallCNBC) March 10, 2023
According to reports, SIVB incurred a $1.8 billion loss in selling the bond portfolio, a sum larger than the net income of the entire company in 2021, which was $1.5 billion. To make up for the losses, the bank plans to sell $2.3 billion in shares, a move that experts consider as a red flag.
SIVB has become a direct victim of the cash crunch in the venture capitalist sector. According to Pitchbook, venture capital deal activity dropped by more than 30% in 2022. In addition, the continued drawdown in valuation among the big hitters in the industry, coupled with the near extinction of initial public offerings, has not augured well with SIVB, and projections don’t look hopeful for 2023.
SIVB’s debacle links to the challenges currently faced by the tech industry. For many years, the bank has served the tech industry, along with providing traditional banking services. SIVB is described as the “lifeblood for tech startups” and has played a significant role in funding projects and companies that traditional lenders consider to be too risky.
The “tech bank,” as it is fondly known, has been sensitive to the boom-and-bust cycles of the tech ecosystem. However, the current downturn is proving too difficult for SIVB to handle.
In trying to wriggle out of the situation, SIVB appears to complicate issues as investors lose confidence in the financial organization. SIVB’s latest actions seem to have heightened the panic level, especially as the fortunes of many tech companies served by the bank continue to drop. The company’s stock fell to the lowest level since 2016 after dropping by a further 26% in extended trade.
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