all about cryptop referances
March 10, 2023 Market watchers discuss the problems facing Silicon Valley Bank (SVB), as the company’s shares fell more than 60% in the last 24 hours. SVB was forced to sell a bond portfolio of $21 billion at a loss of $1.8 billion. Chief executive Greg Becker insists the financial institution “will be well positioned” and is “well capitalised” going forward. SVB’s stock, SIVB, was halted during pre-market trading on Friday after the bank announced it would release news.
Market strategists and investors are focused at Silicon Valley Bank (SVB) and US financial institutions as a whole following the voluntary liquidation of Silvergate Bank. SVB is dealing with significant financial problems after the company’s stock, SIVB, fell more than 60% during Thursday’s trading. SVB is known for its portfolio of technology and venture capital deals, but venture capital activity has declined 30% in the past 12 months. SVB customers using funds at a rapid pace have made it so that SVB’s cash consumption is much higher than venture investments.
Then SVB revealed that it was selling its available-for-sale (AFS) bond portfolio for $21 billion, and the bank lost a total of $1.8 billion on the sale. “We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and increased cash burn levels from our customers,” SVB CEO Greg Becker said in a statement. “Once we see a return to balance between venture capital and cash burn, we will be well positioned to accelerate growth and profitability.”
The Silicon Valley bank is shut down.
Down 80% in two days now 35. pic.twitter.com/lvZjMUHxzE
— TIC TOC TIC (@TicTocTick) March 10, 2023
It has been said that SVB made some terrible investment decisions before the rate hikes, and the bank’s $21 billion bond portfolio produced nothing more than cash burn, and the AFS bond’s value deflated significantly. Because SVB invested in government-backed debt products such as US Treasury bills, the Federal Reserve’s interest rate hikes put the bank in a bad position, and SVB deposits began to decline at a rapid pace. Some people believe that if SVB crashes, the failure could be almost as big as the Washington Mutual (Wamu) bankruptcy.
Good morning everyone! Silicon Valley Bank gets worse. Customers trying to cash out millions of dollars and can’t. Online banking and mobile services show unavailable for some customers.
Share down 60% before stock exchange.
If the bank fails, it will be the second largest… pic.twitter.com/h7YcocnvZX
— Genevieve Roch-Decter, CFA (@GRDecter) March 10, 2023
Bitmex co-founder Arthur Hayes jokingly so Federal Reserve Chairman Jerome Powell may have destroyed the US banking system. “JAYPOW may have destroyed [the] American banking system,” Hayes wrote. “In 2008 it was the banks’ portfolios of bad credit – also known as subprime. In 2023 it was the banks’ portfolios of long-term bonds like USTs and MBS??? If it goes down, remember March 20, big down , bailout, so big up! My body is ready.” Billionaire Bill Ackman told his Twitter followers that a state bailout for SVB should be considered.
“The failure of [SVB] could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and retain their working capital,” Ackman wrote. “If private capital cannot provide a solution, a highly dilutive government-preferred bailout should be considered. After what the Feds did to [JPMorgan] after it bailed out Bear Stearns, I don’t see another bank stepping in to help [SVB].”
According to a pre-market analysis of SIVB shares, it looks like the bank’s stock was in for a very volatile trading day on Friday and was finally stopped. After stop before the market, the bank said it plans to release some news soon. SVB’s woes remind market participants of the Lehman disaster and the recent problems Credit Suisse and Deutsche Bank faced when their valuations went into distress last October.
Recently, S&P lowered the rating on SVB to just above a junk rating. Analysts at DA Davidson gave the company a neutral rating, noting that firms “have not adjusted to the slower fundraising environment” and quantitative tightening (QT) guidelines stemming from the Fed. According to CNBC’s David Faber, sources have told the reporter that Silicon Valley Bank is currently in talks to sell itself.
What do you think the future holds for Silicon Valley Bank and other US financial institutions facing similar challenges, and what impact might their struggles have on the broader economy and technology industry? Share your thoughts in the comments below.
Image credit: Shutterstock, Pixabay, Wiki Commons, Miscellaneous photography / Shutterstock.com
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or an endorsement or recommendation of products, services or companies. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is directly or indirectly responsible for damages or losses caused or alleged to be caused by or in connection with the use of or reliance on content, goods or services mentioned in this article.
