(Tiper Stock Exchange) – Banking stocks have plummeted globally because of difficulties of two US institutions, with a relatively small size but with great interconnections in the tech and startup ecosystem. The sales were triggered by a so-called “bank run” at SVB Financial Group – Silicon Valley bank specializing in supporting innovative stock – and the decision of the cryptocurrency bank Silvergate to close operations.
Late in the evening of March 8, Silvergate announced its intention to close operations and voluntarily liquidate the bank in an orderly way. In a statement, Silvergate said the decision to liquidate its bank was “the best way forward” in light of “recent industry and regulatory developments”. The closure and liquidation plan includes the full repayment of deposits. While it hasn’t explicitly admitted it, the crypto-focused bank has been hit hard by the losses following the collapse of cryptocurrency exchange FTX.
A few hours later, SVB Financial Group announced that it has sold $21 billion worth of securities from his portfolio (which will result in an after-tax loss of approximately $1.8 billion in the first quarter of 2023) and stated that it was by arranging a $2.25 billion stock sale to support your finances. According to analysts, the move was prompted by high outflows of deposits at the bank due to a broader downturn in the startup sector. SVB now expects a sharper decline in the interest margin.
All that has scared off a number of major venture capitalistsincluding Peter Thiel’s Founders Fund, Coatue Management and Union Square Ventures, which have instructed portfolio companies to limit exposure to SVB and withdraw their money from the bank, according to sources cited by Bloomberg.
The CEO of SVB, Greg Becker, has meanwhile held a call with the bank’s customers and investors to buffer the situation. urging them to “keep calm” in an effort to avoid a “bank run”.
SVB describes itself as the “financial partner of the innovation economyand is the only publicly traded bank focused on Silicon Valley and tech startups. According to its website, it does business with nearly half of all US venture-backed startups and 44 percent of tech and health companies -care backed by US venture capital that went public last year.
“The underlying situation – comments Gabriel Debach, market analyst at eToro – highlights two fundamental aspects: the first are the problems of EU banks, excessively dependent on the economic climate of the region, both for better and for worse; while the second, which remains one point to check, is whether the decision and SVB’s criticisms could be directed by the major concerns that the technology sector of Silicon Valley is recording, through layoffs and a marked increase in financing costs”.