Silicon Valley Bank's stocks plunged over 60% on Thursday and caused panic
in the VC industry, with several firms advising portfolio startups to
either withdraw their funds completely or keep the bare minimum in the
bank.
VCs were concerned about the bank's financial stability after
it announced a $2.5B share sale to cover its $1.8B losses that stemmed
from its fixed-income investments. By Friday noon, the California
Department of Financial Protection and Innovation stepped in, closed the bank,
and placed it under the control of the Federal Deposit Insurance Corp.
Insured depositors will have access to their accounts by Monday, said
the bank.
- Per Crunchbase, the fixed-income investments were worth $21B before plunging in value due to rising inflation.
- Coatue, Founders Fund, and Union Square Ventures had asked portfolio startups to move cash out of the bank.
- The
bank had previously reassured clients that it was "well positioned to
serve our clients through market volatility, with a high-quality, liquid
balance sheet and strong capital ratios," said CEO Greg Beckers.
- SVB's market value dropped by $9.4B after the slump in stock prices.
- Bill Sckman, the founder of hedge fund Pershing Square, called on the U.S. government to fund a bailout of the bank.
- He wrote in a Twitter post,
"The failure of [SVB Financial] could destroy an important long-term
driver of the economy as VC-backed companies rely on SVB for loans and
holding their operating cash. If private capital can't provide a
solution, a highly dilutive gov't preferred bailout should be
considered."
