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

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

#111

Post by infamouscow »

cbayram wrote: post #66
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.

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…

If you miss payroll the employees are under no legal obligation to continue laboring for you and the clock for resignations starts ticking. Many will not bother with a formal resignation because it's not clear the company still exists in any meaningful way.

I've also worked at both startups and large companies where problems with the bank or payroll software delayed payroll a day. In those situations there's typically overcommunication about the steps being done to get it resolved ASAP so employees don't walk out.

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

#112

Post by ancorevard »

In hindsight they shouldn't have bought those MBSs, should have foreseen the coming inflation and the following interest rate hikes, and of course shouldn't have said those words yesterday.

However, sad to see what looks to be another government caused implosion.

- First, via the massive government stimulus COVID19 SVB got enormous amount of deposits in 2020/2021. They have to put that money to work, and the traditional lending it back out was not going to work, the market was already flooded with money from the government. So they sadly locked themselves in those MBSs.

- Then the gov finally reacts to their own stimulus and zero interest rates programs and they rapidly raise interest rates in attempts to lower inflation.

- And as a result, the MBSs that SVB holds are underwater in mark to market. Investments into startups fall, so no more influx of customer deposits into SVB. And finally, due to the difficult market (and VC market), all the startups are drawing down their deposits rapidly through their current burn rate. And SVB ends belly up.

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

#113

Post by jejeyyy77 »

zomglings wrote: post #67
jejeyyy77 wrote: post #61

This stuff makes crypto exchange drama look like child’s play.

Centralized crypto exchanges are not a safe haven. Never have been. It does make fully on-chain USDC and DAI stablecoins look like refuges though.

You’re right. I updated my comment.

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

#114

Post by tenpies »

ackbar03 wrote: post #80

They should have bought bitcoin instead. Oh wait, silvergates also in trouble

I know you're being silly, but there's an interesting observation there.

Silvergate's failure doesn't affect BTC on paper, yet Bitcoin did go down.

SVB's failure doesn't affect the USD on paper, yet the dollar is down today[1].

All currencies, fiat or otherwise, are affected by catastrophic events in their ecosystem. The folks having a good day today are the precious metals.

---

[1] Although to be fair, there are a myriad of factors at play in FX, whereas Bitcoin probably has few. However, "bank failure" and the US Treasury announcing they are monitoring some small and regional banks, doesn't fill one with confidence.

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

#115

Post by capableweb »

jejeyyy77 wrote: post #60
bratao wrote: post #5

Earlier quoted context omitted.

I think that very soon they will halt withdraws. Everyone I know already did it or is doing today. Many only had a SVB account, and need some time to open another account to transfer it. (International Startups)

Literally transfer the money anywhere at this point.

You literally cannot just transfer the money anywhere if it's money meant for a business. In many countries, just transferring that money to your personal account would be illegal. And many banks won't allow you to open a business account and directly after transfer millions of funds to it, without a long process of due diligence (AML/KYC). There is also a bunch of anti-terrorism (funding) laws that might prevent things from being done in just hours, especially during the weekend as many (most?) banks are outright closed during the weekend.

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

#117

Post by almost_usual »

aliljet wrote: post #84
almost_usual wrote: post #45

Earlier quoted context omitted.

Supposedly they already have a 15b borrow from the fed. If that’s their only capital then I believe they’re out of options.

Do you mean they've taken money from the fed to capitalize the bank already? I understood they were essentially giving money to the fed through their portfolio of purchases t-bonds.

> Do you mean they've taken money from the fed to capitalize the bank already?

Right

https://twitter.com/FedGuy12/status/1634039424920195072

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

#118

Post by Ekaros »

jejeyyy77 wrote: post #61

This stuff makes crypto exchange drama look like child’s play.

"Money" is there, but it is just worth less than before. Unless you are willing to wait for long time.

They say treasuries are as good as cash, but seemingly it is not entirely so.

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

#119

Post by MrMan »

sgerenser wrote: post #86
aliljet wrote: post #68

Earlier quoted context omitted.

Wasn't this a famously bad transaction for JPM?

This retrospective analysis (1 year after the transaction) shows it was probably a reasonable, although not great, deal: https://www.fool.com/investing/general/2009/09/25/jpmorgan-a... Chase getting a whole bunch of branches in the Southeast and Washington state for practically free probably left them better off in the long run.

it was a tiny deal in terms of the outlay, and I think it was positive to natural long term. not a very risky move for JPM

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

#120

Post by triceratops »

ejb999 wrote: post #53
jpmattia wrote: post #50

Earlier quoted context omitted.

> why should the taxpayers be put on the hook for that? One reason that it was done in the past was because it saves the taxpayers money by bailing out a single meltdown rather than something systemic. But you should recognize: The taxpayers back up the FDIC, but singleton meltdowns are paid out of the insurance fund, which is paid into by the banks themselves. As long as that fund does not get exhausted (ie a system…

and then makes the next failure even more likely - companies will take on more and more risks if they know they will be bailed out. I for one am tired of privatizing the profits, and socializing the losses.

You're right in general. But the FDIC doesn't sound like that.
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