Startup lender Silicon Valley Bank to sell stock to cope with cash burn
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Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#2Do other US financial institutions have the same exposures, or is this a one-off situation based on SVB's closeness to the US tech sector?
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#3Do other US financial institutions have the same exposures, or is this a one-off situation based on SVB's closeness to the US tech sector?
SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets.
In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#4Do other US financial institutions have the same exposures, or is this a one-off situation based on SVB's closeness to the US tech sector?
SVB does a lot of venture debt. When venture debt is not repaid, SVB ends up owning the company, and can recover its exposure only if there is a buyer for the company or assets. In early stage land where valuations are the result of a fairly small consensus, it is plausible that SVB would have over-extended.
Is there a way to tell how close SVB is to failing? If SVB fails does the cash kept in it simply disappear or does the fed step in?
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#5So is this the start of 2008 2.0?
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#6Is the tech-aligned banking sector getting fragile?
Just yesterday Silvergate Bank collapsed. It was the #1 bank in the US for crypto companies. The FTX fallout caused a tidal wave of crypto-related deposits leaving the bank and they were unprepared, apparently having invested the money in bonds that were deep in the red. The Feds stepped in and told them to shut down the bank and repay deposits before things get worse.
(A weird thing about Silvergate is that they bought Facebook's aborted Libra/Diem cryptocurrency tech just last year. It's like there's a curse on Libra.)
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#7I am not an investment or banking guy. And I’m not sure what category of activity this type of lending falls into. But wouldn’t it make more sense to write off the investment losses rather than throw more bags of money on the burning pile?
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#8So is this the start of 2008 2.0?
I think the real start of it will be after the GPT hype dies down. Everyone is racing to build/add AI things and the hype around that is preventing a freefall in the tech sector, IMO.
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#9[deleted]
Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn
#10I am not an investment or banking guy. And I’m not sure what category of activity this type of lending falls into. But wouldn’t it make more sense to write off the investment losses rather than throw more bags of money on the burning pile?
They're a bank.
They have capital ratios to maintain.
If the underlying assets (the assets backing the bank), move in value, then they need to provide extra capital from somewhere. This is them securing that capital base that they need due to the change in value of their current assets (largely US treasuries and mortgage back securities- this isn't really about the value of their tech portfolio).