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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?

#141

Post by lokar »

lolinder wrote: post #25
lokar wrote: post #24

Earlier quoted context omitted.

Interest rates went up. That would be fine if they could hold the bonds until maturity, but to honor withdrawals now they are forced to sell at a loss.

Right! Okay, that makes sense. So the failure on the assets end of the balance sheet was relying on bonds that were purchased at times of historically low interest.

Also, in more normal time they could have put more deposits into shorter term debt that would not have had this problem. But rates were so low that would have been very unattractive.

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

#142

Post by KerryJones »

cityofdelusion wrote: post #129
KerryJones wrote: post #113

Earlier quoted context omitted.

Well, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html

You dodged a bullet. Definitely find out what assumptions you made that were wrong, that could be a very costly mistake in the future. Betting against market headwinds that are blowing strong is always very risky, even when you are correct since sheer momentum can kill an investment.

I was looking at buying in with 1/60th or less of my portfolio (I'm a focused investor, most of my investments are 1/10th of my portfolio) so it would have been a small bet, I was acknowledging this as risky.

I'm still not confident I was 100% wrong -- in my scenario I labeled above included the fact they could go under (I didn't think they would go under), but now that their assets being are being sold, it will depend on how deep of a discount FDIC sells for.

If it's in 40%, there's a good chance that investors will still get money back (I believe).

If it's 80%, they won't get it all back.

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

#143

Post by KerryJones »

user_named wrote: post #124
KerryJones wrote: post #113

Earlier quoted context omitted.

Well, I was wrong: https://www.fdic.gov/news/press-releases/2023/pr23016.html

Yes but you were very confident in everything you said that was wrong, so I guess that's all that matters

I think I only said one wrong thing -- that they would last through this. The rest is factual (still is), I'm not positive that having bought a chunk wouldn't have a positive result (see other comment)

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

#144

Post by KerryJones »

cragfar wrote: post #119
KerryJones wrote: post #50

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…

> - 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 They haven't written down all their bonds yet or seen what they could actually get for them. They only sold the AFS ones, they still have $117 billion in other securities.

Yep -- so if they lost 8% on their other bets, that was still accounted for in my valuation. Even if they lost up to 40% in their other bets (as other comments show).

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

#145

Post by KerryJones »

user_named wrote: post #123
KerryJones wrote: post #44

Earlier quoted context omitted.

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)

No, they did the wrong thing by selling so late.

Agreed -- but are you saying they shouldn't have sold at all? I don't think you can say it was a "wrong decision" at the moment, I agree that it was too late. But you could also go back and say they shouldn't have invested in the long term assets in the first place.

Or you could go back and say they shouldn't have accepted the deposits without having short-term gain solutions in the first place.

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

#146

Post by mikeyouse »

zamnos wrote: post #136
mikeyouse wrote: post #134

Earlier quoted context omitted.

>> When Lehman Brothers collapsed in 2008, many people lost money over $100k. So many, that FDIC retroactively raised the insured limit to $250k and made people whole up to $250k. A lot of the money over that simply evaporated. That's not at all true.. 100% of Lehman customers received 100% of their funds. Secured creditors also received 100% of their funds. https://www.sipc.org/news-and-media/news-releases/20220928…

From your link https://www.sipc.org/news-and-media/news-releases/20220928 : > Distributions to unsecured general creditors with allowed claims totaled over $9.372 billion, representing a 41.2841 percent recovery. That sure sounds like 58.7259% didn't recover what they were owed. Mind explaining why that isn't the case? And what about IndyMac? IndyMac depositors only got 50 cents on the dollar. https://www.depositacco…

Unsecured creditors in Lehman Brothers were entities like other banks and hedge funds who either offered unsecured credit lines or bank loans -- they're inherently risky and have nothing to do with retail or consumer banking. Those entities ate the losses and none of their customers lost money. It's good and appropriate they saw haircuts after the depositors and secured creditors were repaid in full.

Indymac is an interesting case - their insured depositors were made whole at $100k and then the uninsured amounts were paid out immediately at 50% -- but then that is indeed when Dodd Frank did the retroactive FDIC raise to $250k -- so all of their depositors were fully reimbursed at $250k and presumably there were some losses of uninsured beyond that. It was a weird entity, they didn't have any debt or secured creditors so there wasn't anything else for an acquiring bank to buy once it was bankrupt. Very different than SVB but fair enough, a case where uninsured depositors lost some money in a bank run.

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

#147

Post by [deleted] »

yanderekko wrote: post #128
whitemary wrote: post #96

Earlier quoted context omitted.

Nonsense. A bailout has more precedent now, and the current political situation with the Democrats in the White House virtually guarantees it. The last bailout never had a precedent or approval of the American people, but they did it anyway and they will do it again. Capitalism doesn’t allow planning for the worst. Karl Marx showed us this 150 years ago, and the working class is regularly reminded in blood, but the r…

>Capitalism doesn’t allow planning for the worst. Governments bailing out banks is not capitalism.

[deleted]

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

#148

Post by bloppe »

Edmond wrote: post #139
bloppe wrote: post #135

Earlier quoted context omitted.

So you're saying having zero money is equivalent to having future money that can be borrowed against in the present? Obviously the latter is not as good as just having money. But it's clearly better than the former. Therein lies the difference between solvency and liquidity problems.

Not at all, my point is to avoid fancy words like "solvency" and "liquidity", they blind you to the basic fact that if you need cash today and you can't get it then you're broke. Whether you have assets that *you* believe you could draw on in the future doesn't matter when your need is immediate.

You say blindingly fancy words. I say important difference.

You say basic fact. I say oversimplification.

We can argue about the semantics of the word "broke", but the difference here is between losing all your money vs. having to take out a loan now that you're pretty much guaranteed to be able to repay when your bonds mature and only losing the interest payments on that loan.

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

#149

Post by hugs »

hugs wrote: post #4

No plans to move money out. But definite plans to create a new, additional account elsewhere and when payment for current orders in process comes in over the next 30 to 60 days, have those new funds go into the new account. (Basically, diversifying is good, and I shoulda/woulda/coulda done it sooner, but it was never my top priority... until now.)

This didn't age well. So... Definite plans now to move 100% of my money out. Thankfully, I'm within FDIC limits.

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

#150

Post by orf »

jtarud wrote: post #58

I think this thread will have tons of views from people in the startup world that are likely to be SVB customers. If we all agree to not do run in the bank, it will improve chances for SVB to make it through the next few days. I'll start with committing not to withdraw money my company [redacted] holds in the bank. We stand by SVB. I invite others to do the same.

I guess it’s kind of sweet and innocent to have such faith that a group of disparate people would act against their own self interest for only a nebulous future “common good” outcome, and that would be sparked by a comment on an internet forum.

Makes me feel kind of jaded to be honest. But maybe that’s the problem with society. Maybe we all just need to band together and not be swallowed by despair. Screw it - I also pledge to not withdraw any of my 0$ from SVB.

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