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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

#241

Post by jpmattia »

toast0 wrote: post #138
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.

FDIC is probably involved with this sale already. But even if not, they likely will be soon, might as well start dilligence and figure out what your price would be.

I don't doubt it. The classic time for FDIC to invade a corp headquarters is Friday afternoon (the cliché is that they show up with lots of pizza) so they have max time to resolve it before opening of biz on Monday.

I think odds are good that we see that this weekend.

Edit: aaand FDIC couldn't wait until COB

https://finance.yahoo.com/news/fdic-closes-silicon-valley-ba...

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

#242

Post by samstave »

KoftaBob wrote: post #122
ejb999 wrote: post #34

Earlier quoted context omitted.

rising interest rates, and an economy that is beginning to falter.

Based on what?

Falter or maybe 're-balance' --> Look at all the thousands of layoffs in tech, the price of real-estate at all sectors, interest rates, savings-account rates of the population, homeless, unemployed, under-employed etc.

There are a fuck-ton of factors that all have not-so-rosey outlooks.

Its amazing we dont have an actual game "sim America" and you get to fiddle with all the various economic levers in our tax code and see the output based on real data coming from various sources in the economic space (like farm, military, foreign subsidies, etc)

One that takes in the budget proposal from .gov and lets you fiddle with the model and such and crowdsource the best model outcomes through millions of game players - rewarded kind of like the lottery - everyone pays $1 a month to come up with the best model - its run through many simulations and the best model wins a bunch of cash. and then, wait for it, chatGPT writes an actual budget bill to be voted on.

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

#243

Post by jedberg »

listenallyall wrote: post #236
jedberg wrote: post #167

Earlier quoted context omitted.

It was a lot of little things, but the main thing was that the understood startups so they would take into account your funding as well as your LOIs when making loan decisions, whereas most banks would not because they didn't understand them. That made it easier to get free cash when all of your startup's assets were basically owed money.

Or maybe the conservative old guard banks do understand, that startups without reliable cash flow, or on a growth-at-all-costs trajectory, are poor lending prospects. Seems whatever you claim that SVB "understood" led to its demise.

What appears to have led to the demise was when they branched out beyond startups into more traditional banking activities like mortgage backed securities.

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

#244

Post by hnfong »

glasshug wrote: post #230
hnfong wrote: post #148

Earlier quoted context omitted.

> That's a lot but also means depositors get 80-85% of their money back That's not what happens. Let's say 100 clients each deposited $1 in the bank, and the bank loses $20, so only has $80 to pay out when liquidated. Let's say half (50) depositors withdraw their funds early, they each get $1 back. So now the bank has $30 in assets and has to pay 50 people. Suppose 20 people demand withdrawals, and the bank pays $20…

You're also forgetting about clawbacks of preferential transfers that happened less than 90 days before bankruptcy. 11 U.S.C. 547.

I learned something. Thanks!

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

#245

Post by fr0sty »

mhluongo wrote: post #202
airza wrote: post #185

Earlier quoted context omitted.

This isn't bitcoin world though, deposits are FDIC insured to stop this

FDIC limits are low. Socialized losses can definitely happen past those limits.

A document I saw yesterday claimed that SVB had ~$160B in uninsured deposits.

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

#246

Post by [deleted] »

mathattack wrote: post #144
ancorevard wrote: post #112

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 traditio…

SVB wouldn’t have these issues if they monitored the risk better. If they put the money in short term govt bonds they would be fine. Or if they kept the rates they paid on deposits low to discourage the excess, they would also be fine. Banks are in the business to manage risk. The sad part is this risk management and investment process is concentrated in a very small group. Most of the bank employees are very good, h…

[deleted]

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

#247

Post by lvl102 »

dragontamer wrote: post #139
lvl102 wrote: post #131

Earlier quoted context omitted.

People will point to duration mismatch but Fed raised too fast without proper warnings.

Inflation is still 6% YoY. Fed hasn't raised fast enough and is looking at +.50% next meeting.

Inflation is alway a monetary phenomenon. They caused this episode of inflation. All of those people at Fed should resign.

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

#248

Post by [deleted] »

Dwolb wrote: post #179
batmaniam wrote: post #155

What made SVB so attractive to startup founders? All the news reports I'm reading is saying that's their target customer. What advantages did SVB provide that other brand named bank didn't? Wouldn't it have been safer to put your startup's money in Bank of America, or JP Morgan, etc? I've never heard of SVB until the crash.

They had good relationships with VC funds to top up portfolio companies with extra cash (debt). SVB would be lenient to the entire portfolio in exchange for access to the best performing companies. i.e. Company A is a Series A start-up that needs non-dilutive financing to bridge itself to the next round. SVB would be willing to lend when no one else would. In exchange, VC’s would introduce SVB to much healthier growt…

[deleted]

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

#249

Post by samstave »

ttul wrote: post #83
yellow_postit wrote: post #69

Will all the private assets that have avoided markdowns since the downturn be forced to get re-valued when a new entity buys SVB? They’d have to I assume to value their new books. If yes that’s a lot of valuation haircuts.

Any buyer would do their own diligence and assign their own estimated value to the assets. I believe there will be a healthy competition for SVB despite their current problems. Many other banks have long wished to establish a presence in the tech world, where SVB has for a very long time been a leader.

Where can one find a list of companies that have primary banking through SVB?

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

#250

Post by swift532 »

cddotdotslash wrote: post #219
jschveibinz wrote: post #146

Startups with good VC and investor relationships will most likely make payroll and pay bills through short term loans from the investors until they can access their funds. But it is a good lesson in money management…something about eggs and just one basket?

Here’s somethingI don’t understand. Say you raise $100m funding round. Investors just give you the entire amount, in cash? And companies just put that entire cash amount in a bank? It seems like it would be better for VCs to keep the money, invest it (in, I don’t know, the S&P500), and then pay out to the companies on a monthly basis or some other terms. I can’t fathom how there are hundreds of companies, each with 1…

They don't have to be sitting there. A startup with a good person running finances will also have short term investments (should not be S&P though). Not sure about all startups in general but in my experience so far, this is what happens.
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