Equities Silicon Valley Bank fell sharply on Thursday in the wake of the company’s announcement that raises additional capital by selling sharestake a burden to roll over a portfolio of assets into higher yielding assets and expand the ability to borrow over time.
Given the recent banking-related carnage in the tech and tech-adjacent worlds, there is concern in the market that all is not well at SVB. Speaking to venture capital clients, the company’s CEO Greg Becker said their assets are safe and the share sale was announced as an effort to increase the bank’s financial flexibility, strength and profitability.
Becker said the bank has “sufficient liquidity” to support its clients “with one exception: if everyone tells each other that SVB is in trouble, it becomes a challenge.” The executive asked VC clients to “keep calm. That’s my question. We’ve been around for 40 years, supporting you, supporting the portfolio companies, supporting venture capitalists.
The bank’s share price is down more than 60% from last year at the time of publication.
In his investor presentation Regarding the various financial moves shared last night, the company noted that venture capital firms were investing less and early-stage clients were still burning – consuming – cash at all-time highs. The mismatch led to what the company described as pressure on its “balance sheet of cash flows.”
ukbusinessupdates.com is hearing from some founders and investors that startups are being encouraged to consider withdrawing money from SVB over concerns about its health. If many do, their actions could exacerbate the mismatch in deposits and withdrawals, potentially increasing the pressure SVB is under.
According to the SVB’s mid-quarter update, the company argued in chart form that it has a low loan-to-deposit ratio, at 43%. Just how much protection that can provide in the wake of a stock sell-off and concerns among its key client base will become apparent in the days to come.
ukbusinessupdates.com is actively reporting on the industry’s response to the SVB news and sell-off, especially how startups are choosing to respond. More to come.
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