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Ask HN: How is the SVB situation affecting your startup?

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Re: Ask HN: How is the SVB situation affecting your startup?

#41

Post by blitzar »

abarringer wrote: post #29
karpierz wrote: post #18

Earlier quoted context omitted.

The issue is not that SVB has loaned too much to companies that can't pay it back. The issue is that SVB took in a lot of deposits in 2021-2022, and locked them into 10 year bonds at 2.5% interest. Now in 2023, a lot of their customers are burning money (withdrawing funds) and aren't raising money (depositing funds), and so they need to start liquidating the 10 year bonds. The issue is that the 2021 bonds are discoun…

Right, Talking to some people in the banking industry and the fear is no one know which other banks are in similar situation.

hint: every bank

Most banks dont have the same cash flow in/out profile that SVB are facing thus wont have the same issues.

Re: Ask HN: How is the SVB situation affecting your startup?

#42

Post by NickC25 »

readyoursicp wrote: post #39
idopmstuff wrote: post #37

Earlier quoted context omitted.

Why can't you sell them? Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.

I read them as puts on SVB, but he can't sell them because they halted trading on SVB.

This ^. I bought puts yesterday at open, wanted to sell them today.

Re: Ask HN: How is the SVB situation affecting your startup?

#43

Post by jackric »

NickC25 wrote: post #40
idopmstuff wrote: post #37

Earlier quoted context omitted.

Why can't you sell them? Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.

No, I own put options on SIVB itself. Trading was halted in premarket and has yet to reopen. Honestly, it's disgusting. The amount of profit I would have made would be more than life-changing at a time when I could really use the money.

"It's a big club, and you ain't in it!" - George Carlin

Re: Ask HN: How is the SVB situation affecting your startup?

#44

Post by KerryJones »

lolinder wrote: post #16
kasey_junk wrote: post #10

Earlier quoted context omitted.

SVB has an extremely low loan to deposit ratio (~.45). Most of their assets are in the form of treasuries, bonds, etc. Depositor concentration is definitely high but that’s not particularly uncommon in banks (though for one of this size it is). But that concentration is what fueled their growth as well.

> Most of their assets are in the form of treasuries, bonds, etc. I believe you know what you're talking about, but if that's the case why are they struggling to raise capital to pay depositors? (I'm asking as an ignorant outsider to banking in general and SVB in particular.)

They factually lost 1.8B on 21B worth of investments, this is an 8.5% loss. Unclear why there's conjecture like previous comments saying its a 25% loss.

They did the right thing by selling out now -- likely because they see more rates raising in the future which would decrease it, so they took the liquidity and then raised a bit of money to cover up that loss (raising 2.25B)

Re: Ask HN: How is the SVB situation affecting your startup?

#45

Post by Aperocky »

phpnode wrote: post #33
Aperocky wrote: post #28

Earlier quoted context omitted.

So a slow version of Terra Luna. Resilient system design doesn't just apply to engineers.

it's a totally different situation to Terra/Luna

The Terra/Luna system would work very well when Luna's cap >> Terra.

The SVB system would work very well if the interest rates stay low, when they could liquidate their 10 year bonds for same value (and their start up would be more likely to turn profits as well).

These are all systems designed with assumption that turned out to be false.

Re: Ask HN: How is the SVB situation affecting your startup?

#46

Post by rocqua »

lolinder wrote: post #16
kasey_junk wrote: post #10

Earlier quoted context omitted.

SVB has an extremely low loan to deposit ratio (~.45). Most of their assets are in the form of treasuries, bonds, etc. Depositor concentration is definitely high but that’s not particularly uncommon in banks (though for one of this size it is). But that concentration is what fueled their growth as well.

> Most of their assets are in the form of treasuries, bonds, etc. I believe you know what you're talking about, but if that's the case why are they struggling to raise capital to pay depositors? (I'm asking as an ignorant outsider to banking in general and SVB in particular.)

Treasuries and bonds drop in price when interest rates go up.

in 2021 (when interest rates were low) you might pay 100 cents on the dollar for a treasury that payed 2.5% interest. In 2023, with interest rates much higher, you can no longer sell that treasury for 100 cents on the dollar. People can get much better returns by just buying recent treasury. So you need to sell your bonds lower, at say 95 cents on the dollar. That is an immediate 5% loss.

This is known as 'interest risk' and is really the only risk you have when buying safe bonds like treasuries. The risk is completely avoidable if you can hold your bonds to maturity, so it only matters in a liquidity crunch.

Re: Ask HN: How is the SVB situation affecting your startup?

#47

Post by [deleted] »

idopmstuff wrote: post #37
NickC25 wrote: post #34

I own put options that I bought yesterday at market open. It's not affecting my startup, but it's affecting my portfolio and I'm not happy that I can't sell those options.

Why can't you sell them? Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.

[deleted]

Re: Ask HN: How is the SVB situation affecting your startup?

#48

Post by chasely »

karpierz wrote: post #18
lolinder wrote: post #5

> most startups in the US bank with them Is this true? And if so, how was this not a major red flag for investors earlier? From what I gather as an outsider, it sounds like SVB has most of its assets in the form of loans to tech startups and most of its liabilities in the form of deposits from tech startups. This seems like an obvious recipe for disaster in the event of a tech downturn, no? EDIT: People have clarifie…

The issue is not that SVB has loaned too much to companies that can't pay it back. The issue is that SVB took in a lot of deposits in 2021-2022, and locked them into 10 year bonds at 2.5% interest. Now in 2023, a lot of their customers are burning money (withdrawing funds) and aren't raising money (depositing funds), and so they need to start liquidating the 10 year bonds. The issue is that the 2021 bonds are discoun…

Why would they buy 10-year bonds when their depositors are startups, many of whom won't exist in 10 years? Seems like shorter-term T-bills would have been more appropriate, but I know next to nothing about finance.

Re: Ask HN: How is the SVB situation affecting your startup?

#49

Post by eropple »

NickC25 wrote: post #40
idopmstuff wrote: post #37

Earlier quoted context omitted.

Why can't you sell them? Edit: I'm realizing now that you probably meant you have put options on other companies through an SVB account that you can't access because of account issues, not that you have puts on SVB, which was my initial read.

No, I own put options on SIVB itself. Trading was halted in premarket and has yet to reopen. Honestly, it's disgusting. The amount of profit I would have made would be more than life-changing at a time when I could really use the money.

TBH, if you're knowledgeable enough to be playing with puts, you should know that banks don't act like other equities in cases of extremity. It may be a bummer in the individual case, but it keeps the money machine working for society as a whole.

Re: Ask HN: How is the SVB situation affecting your startup?

#50

Post by KerryJones »

Investor here (trying to buy into SVB), but I don't currently own anything, nor do I have any current accounts with SVB.

Everything I can see about them is completely overblown. Short and sweet version of research so far:

- They had sold their bond portfolio for 1.8B loss (originally 21B, this is 8.5% loss)

- They decided to raise money to match that loss (news release on 3/8/23)

- Headlines are confusing people with "can't sell" referring to the 3/8 attempt at capital raise, but now people think SVB is trying to sell

- Their Total Equity is around 13B (last balance sheet) -- that means if they completely dissolved and paid off all debts they would still have 13B on the balance sheet. Market Cap EOD 3/9 was 6.5B -- half of their actual asset value

- If they go into cash insolvency and get bought out, they will likely have to sell those illiquid assets at a discount (let's estimate a 40% discount) - it's still worth 6.8B.

Y'all SVB has been through this before, both in .COM and and '08. Also, to be clear -- I do not own any stock (but I want to)

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