Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

SVB in talks to sell itself after attempts to raise capital fail

cnbc.com

Post reply on HN
Print view View original

101–110 of 310 posts

Re: SVB in talks to sell itself after attempts to raise capital fail

#101

Post by cjblack »

dboreham wrote: post #82
cbayram wrote: post #66

Earlier quoted context omitted.

Playing out this scenario: Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail. A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer…

Employers are legally on the hook for payroll so what will happen is management/stock holders will foot the bill.

Management and shareholders would not be personally on the hook for missed payroll in the event of insolvency.

If all the cash evaporated from my company's account, we were forced to declare bankruptcy, that's pretty much game over. The employees would be among other creditors figuring out their turn to pick over the remains. The employees may end up near the top of the list, but they wouldn't get to hold the C-Suite or shareholders accountable on a personal level.

They're contractually obligated to pay their employees, but that contractual obligation rolls up to the company level, not the people who run or own it.

Re: SVB in talks to sell itself after attempts to raise capital fail

#102

Post by rcme »

moondistance wrote: post #15
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

There has been interest in acquiring SVB for a long time. There will be multiple bidders and a deep discount. Suspect a sale will happen this weekend.

There was interest when SVB was solvent. Right now, SVB has negative value. E.g. you'd need to buy SVB for X and then pay an additional Y to balance the books. Y is likely to be a certain percentage of deposits and could be quite large. The only groups that will be interested in SVB are likely VC funds that are worried about an SVB collapse disrupting operations at the VC's startups.

Re: SVB in talks to sell itself after attempts to raise capital fail

#103

Post by rich_sasha »

rcme wrote: post #95
rich_sasha wrote: post #87

One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…

No, failing is failing. It means the bank is insolvent. That doesn't mean the bank is worthless, but it doesn't have enough cash to meet its obligations. And yes, depositors will likely get some of their money back, but only after a long battle. Also, the bonds held by the bank are likely off the run. The market for these is not large.

Yes, insolvent, but the money doesn't go poof.

I never traded cash bonds but would struggle to imagine it would be hard to liquidate. Sure, over a week, but surely SVB can't be a major bondholder.

Re: SVB in talks to sell itself after attempts to raise capital fail

#104

Post by rich_sasha »

tbruckner wrote: post #96
rich_sasha wrote: post #87

One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…

The issue is that a startup needs that capital right now. They cannot wait for bankruptcy courts to redistribute.

Yeah, well, indeed, that is an issue. I'd imagine it would be possible to get a fraction of it now via some third party, but that could be quite a haircut too.

Re: SVB in talks to sell itself after attempts to raise capital fail

#105

Post by capableweb »

dboreham wrote: post #82
cbayram wrote: post #66

Earlier quoted context omitted.

Playing out this scenario: Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail. A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer…

Employers are legally on the hook for payroll so what will happen is management/stock holders will foot the bill.

And finally, if management/stock holders cannot/evades paying it out, it's tax payers who end up footing the bill.

Re: SVB in talks to sell itself after attempts to raise capital fail

#106

Post by pigsty »

dmix wrote: post #17
rickreynoldssf wrote: post #13

I'm feeling like this is early days of a disaster in Silicon Valley. We're at the first or second domino teetering right now. I hope a Sequoia or KPB will step up and save the bank, otherwise a lot of their portfolio investments are about to start missing payrolls.

I can't count how many times I've read similar comments on HN in the last 10yrs

If everyone’s saying we’re in a bubble, we probably are. Just because it keeps getting bigger doesn’t mean it’s not going to pop.

We’ve had 15 years of people getting billions for phone apps made in 12 months and forgotten in 6. Random individual software startups are valued more than basically the entire hardware industry under them. Bitcoin peaked out at 1.28 trillion and it still has no use beyond being a converter from dollars, to crypto, to dollars again with the occasional hand wavey “dude it’s totally completely secure and stable and everyone will use it in the future as a currency! Look how much I made by investing at the peak!” story.

Re: SVB in talks to sell itself after attempts to raise capital fail

#107

Post by MrMan »

crisdux wrote: post #24
jpmattia wrote: post #11

I don't understand the incentive for a bank to buy them at this point, because any potential buyer might as well wait until the FDIC steps in to resolve the bank. Any banking wizards at HN who can explain the dynamics? edit: At the very least, FDIC should issue a statement guaranteeing beyond the $250K/depositor limit sooner rather than later in order to stem some of the outflow.

I'm spitballing here but it could be an opportunity for another bank to expand into a new market and acquire new customers. SVB has a unique position in the market, as they specialize in catering to the financial needs of industries such as technology, life science, healthcare, private equity, and venture capital.

these specialist banks are not worth much, there is no retail banking advantage to having tech companies as clients. the individual people who run the companies are most likely already wealth management clients of the same banks that might acquire SVB.

Re: SVB in talks to sell itself after attempts to raise capital fail

#108

Post by donedealomg »

stephen_g wrote: post #28

Interesting. Looking at their website, I don’t get how SVB was supposed to work. Retail and commercial banks (as opposed to investment banks) make almost all their money from lending, especially against fairly safe assets like real-estate, but SVB doesn’t seem to have a lot of those kind of lending products advertised. Successful banks have deposits just because they need the transfers coming in to keep up liquidity…

[dead]

Re: SVB in talks to sell itself after attempts to raise capital fail

#109

Post by yeahsure22 »

VHRanger wrote: post #85
yeahsure22 wrote: post #63

Earlier quoted context omitted.

How about bank failures? As in multiple banks have now failed.

The bank failures (SI, SBNY, SIVB) were tied to stuff that grew 300% in 2 years (speculative VC crap, crypto) It's bad, but likely still a contained collapse (hopefully!)

It doesn’t work like that, these banks didn’t fail because of exposure to particular industries. They failed to manage their IR risk just the same as every other American bank. Now they will all be in for some serious pain. In 2021 it would have been considered fringe economic theory for rates to hit 5%. Most economists would have told you it was more likely to be at -1% now.

Re: SVB in talks to sell itself after attempts to raise capital fail

#110

Post by nonethewiser »

rcme wrote: post #95
rich_sasha wrote: post #87

One thing to bear in mind is that "failing" is not binary. The story seems to be that SV put all their deposits into 10 y bonds in 2021. I'll use that as an approximation. A 10Y bond will usually move about 8x as much as the underlying interest rate (it's called "duration"). So if SVB did nothing but buy these bonds and sit on them, then they would have lost about 36% on these (8 x 4.5% rate movement). That's a lot b…

No, failing is failing. It means the bank is insolvent. That doesn't mean the bank is worthless, but it doesn't have enough cash to meet its obligations. And yes, depositors will likely get some of their money back, but only after a long battle. Also, the bonds held by the bank are likely off the run. The market for these is not large.

You're disagreeing but I dont see the conflict between your claims and his.
Post reply on HN