US banking woes? Silicon Valley Bank shares fall 1 day after Silvergate collapse

Fears about the future of another United States bank rose this week after Silicon Valley Bank (SVB) announced a significant sale of assets and shares in a bid to raise additional capital.

However, some investors may worry that all is not well with the tech startup and VC-focused bank, especially since crypto bank Silvergate closed a day earlier. Shares of Silicon Valley Bank plunged more than 60%, wiping about $80 billion off the bank’s stock.

SVB is one of the top 20 largest banks in the US and provides banking services to crypto-friendly venture firms such as Sequoia and Andreessen Horowitz (a16z).

March 8 in the financial year UpgradeIt disclosed that it sold $21 billion worth of bonds at a loss of $1.8 billion to shore up its balance sheet.

It also raised $500 million from venture capital firm General Atlantic. It is also seeking to raise another $1.75 billion in the sale of its shares, for a total of $2.25 billion.

It said the sale was made in anticipation of “continued high interest rates, stressed public and private markets and rising cash burn levels when investing in our clients’ businesses”.

However, the release of the funds sent SVB’s share price down 60% on March 9. According to Investors worried about the bank’s financial health to Google Finance. It saw a further decline of 23% in after-hours trading.

SVB’s five-day chart shows a one-day price decline from nearly $265 in after-hours trading on March 9 to nearly $80. Source: Google Finance

As of March 9 Report From the information, SVB President Greg Becker told investors to “keep calm” and added that “the bank has plenty of liquidity for our customers without one exception: if everyone tells each other that SVB is in trouble, it will be a challenge.”

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In a partner LetterBecker reaffirmed that the bank is “well capitalized,” with “one of the lowest loan-to-deposit ratios of any bank of our size” and expects to invest the capital from the sale in “more asset-sensitive, short-term” bonds.

Many shared concerns about the potential knock-on effect if SVB’s customers triggered a bank run.

On Twitter, founders and tech executives broadcast their support for the bank and urged others not to panic.

Mark Suster of Front Ventures Tweeted On March 9, “V.C. People in the community should speak out to ease the panic [SVB].”

“I believe they will only fail if everyone panics, so I will insist on taking calm decisions based on facts,” he added.

Responding to the news, Zach Kukoff, principal at VC firm General Catalyst, said the bank has “continued to step out” for startups, adding that “now is the right time to support them.”

Related: The fall of Silvergate sparks a debate about whose fault it really is

The uncertainty over SVB continues just a day after Silvergate said it would “freeze operations” and dissolve its crypto-friendly bank.

In a March 8 announcement, Silvergate Capital Corp said The decision to close operations was made “in light of recent industry and regulatory developments”.

Silvergate has been one of the main banking partners for many crypto companies, but concerns about its leverage surfaced following its announcement to delay its 10-K filing by two weeks. The document provides an overview of a company’s financial position.

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