Fears grew about the future of other US banks this week after Silicon Valley Bank (SVB) announced a significant sale of assets and shares to raise additional capital.
However, some investors may be worried that not all is well at tech startups and VC-focused banks, especially given the closure of crypto bank Silvergate just a day earlier. Shares in Silicon Valley Bank fell over 60%, wiping some $80 billion in the value of the bank’s shares.
SVB is one of the 20 largest banks in the United States and provides banking services to crypto-friendly venture firms Sequoia and Andreessen Horowitz (a16z).
In a financial update on March 8, it announced the sale of $21 billion in securities holdings at a loss of $1.8 billion to maintain its balance sheet.
It also raised $500 million from venture capital firm General Atlantic and is seeking to raise another $1.75 billion in stock sales, for a total of $2.25 billion.
It said the sale was made because it expects “higher interest rates, pressured public and private markets, and a higher rate of cash burn from our clients when investing in businesses.”
However, the financial release sent SVB’s share price down as much as 60% on March 9, according to Google Finance, with investors concerned about the bank’s financial position. It also saw a 23% drop in after-hours trading.
According to a March 9 report from The Information, SVB chief Greg Becker told investors to “remain calm” and said the bank has “enough liquidity to support our clients with one exception: If everyone tells us SVB is in trouble, it will be challenge.”
In a stakeholder letter, Becker reiterated that the bank is “well capitalized,” with “one of the lowest loan-to-deposit ratios of any bank of our size” and expects to reinvest the capital from the sale into “more asset-sensitive, short-term securities.
Many have concerns about the possible effects if SVB’s clients will bank.
On Twitter, the founders and tech executives however offered their support for the bank and urged others not to panic.
Mark Suster of Upfront Ventures tweeted on March 9 that “more in the VC community should speak out publicly to quell the panic about [SVB].”
3 / I believe the biggest risk for startups and VCs (and for SVB) will be mass panic. The classic “run on the bank” harms our entire system. People make public jokes about it. This is not a joke, this is serious. Please treat it as such
— Mark Suster (@msuster) March 9, 2023
“I believe they can only fail if everyone panics, so I’m asking for a calm decision based on the facts,” he said.
In response to the news, Zak Kukoff, principal at VC firm General Catalyst, said the bank “constantly goes out of its way” for startups, adding that “now is the right time to support them.”
I will say – SVB has consistently gone out of its way to do the right thing for startups and the ecosystem. Now is the right time to support them
— Zak Kukoff (@zck) March 9, 2023
related: The Silvergate collapse sparked a debate about who was to blame
The uncertainty surrounding SVB comes just a day after Silvergate said it would “cease operations” and ditch the crypto-friendly bank.
In a March 8 announcement, Silvergate Capital Corporation said the decision to close operations was “in light of new industry and regulatory developments.”
Silvergate is one of the main banking partners for many crypto companies, but concerns about its solvency arose after the announcement that it would delay the filing of its annual 10-K report by two weeks. The document provides an overview of the company’s financial situation.