Well, this is just a disaster. Let’s dig into the timeline:
Thursday, March 9th, venture funds advise their portfolio companies to withdraw funds from SVB.
They did this because SVB had lost $1.8B in selling U.S. Treasures and Mortgage-backed securities which they were cornered into selling due to high-interest rates.
SBV then decided to raise a bunch of money to safeguard its business. The plan was to sell $1.25B of common stock to investors, $500M in convertible preferred shares, and $500M of its common stock to the private equity firm General Atlantic
The problem with that is…. nobody would come to the rescue.
The CEO issued a statement of reassurance and urged clients to remain calm.
How many times have we heard that?
Simultaneously, clients were having problems withdrawing their funds.
The stock fell 60% that same day.
Friday morning, SBV was in panic mode. They ordered staff to work from home and panic-searched for a buyer.
They didn’t find one, and the FDIC closed the bank down and took over shortly after.
Fallout
93% of investments in SVB were above the $250,000 Federally Insured Deposit cap. Meaning that we are about to see a whole lot more layoffs and business closures.
This marks the second biggest bank failure in history, and the largest since 2008.