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Silicon Valley Bank scrambles to sell itself after failing to raise capital: report

Silicon Valley Bank’s parent company is in talks to sell itself outright after the embattled tech lender’s executives failed in efforts to raise outside capital, according to a report Friday.

SVB Financial has reportedly tapped outside advisers to facilitate a potential sale and “large financial institutions” are exploring a potential acquisition of SVB Financial, CNBC reported, citing sources familiar with the matter.

SVB shares — which plunged 60% yesterday after the company’s CEO begged investors to “stay calm” and not “panic” over liquidity concerns — were halted in premarket trading for pending news ahead of CNBC’s report.

The Post has reached out to SVB Financial for comment.

Shares of SVB Financial plunged 60% on Thursday as concerns about its solvency sparked client fears and wider concerns that the contagion could spread the US banking sector. The stock was down another 62% ahead of the market open on Friday morning.

The S&P 500 banks index plunged more than 6% on Thursday and opened lower on Friday.

SVB Financial
SVB Financial failed in its bid to raise capital.

The panic ensued after SVB was forced to pursue a $21 billion fire sale of its bond portfolio to stave off a cash crunch. The bank estimated it took a $1.8 billion loss on the sale.

SVB is a preferred bank for tech sector startups and venture capital firms in the area. A prolonged downturn in the sector, driven by a spike in interest rates, have drained its coffers.

Several prominent venture firms, including billionaire Peter Thiel’s Founders Fund, urged startups to pull their money from SVB due to fears it could collapse.

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SVB Financial
SVB Financial is a preferred partner for tech startups and venture capital funds.
Bloomberg via Getty Images

SVB CEO Greg Becker tried to calm investors during a conference call on Thursday as anxiety mounted about a potential run on the bank.

“My ask is to stay calm because that’s what is important,” Becker said on the call. “We have been long-term supporters of you — the last thing we need you to do is panic.” 

On Wednesday, SVB had said it was aiming to sell $1.25 billion in common stock and an additional $500 million of convertible preferred shares as part of its effort to raise cash and assuage concerns among its clients.

SVB Financial
SVB Financial’s stock has plunged over the last two days.
Google Finance

Separately, SVB reached a deal with investment firm General Atlantic to sell $500 million of common stock, but that deal was dependent on the completion of its initial share sale.

Prominent investors are already the sounding the alarm about SVB’s potential collapse.

“It is possible today we found our Enron,” said Michael Burry, the hedge fund boss made famous in the 2015 film “The Big Short.”

Billionaire hedge fund manager Bill Ackman argued the government should consider a bailout of the bank to avert a full-fledged crisis.

“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,” Ackman tweeted.

“If private capital can’t provide a solution, a highly dilutive gov’t preferred bailout should be considered.”

By: Ny Post

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