The collapse of Silicon Valley Bank was a “Lehman moment” for the innovation market, according to a top Goldman Sachs deal-maker.
Cliff Marriott, co-head of innovation, media and telecoms in Europe for the financial investment banking department of Goldman Sachs, stated that the March 10 shutdown of SVB was “pretty stressful,” as the lending institution’s customers rushed to find out how they would make payroll.
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“That first weekend was a little bit like the Lehman moment for technology and it was really more operational for those companies,” Marriott informed CNBC’s Arjun Kharpal in an interview at a Goldman Sachs tech seminar that aired Tuesday on “Squawk Box Europe.”
“They needed access to capital. A lot of their balances were on SVB. And, secondly, SVB was propelling and making a lot of their payments for payroll to pay their employees.”
Founded in 1983, SVB was thought about a trustworthy source of financing for tech start-ups and equity capital companies. A subsidiary of SVB Financial Group, the California- based business lending institution was, at one point, the 16 th-biggest bank in the U.S. and the biggest in Silicon Valley by deposits.
SVB was taken control of by the U.S. federal government after its customers of investor and tech start-ups withdrew billions from their accounts. Many VCs had actually encouraged portfolio business to pull funds on the back of worries that the lending institution might collapse.
SVB Financial Group’s holdings– possessions such as U.S. Treasury expenses and government-backed home loan securities that were deemed safe– were struck by the Fed’s aggressive rates of interest walkings, and their worth dropped considerably.
Earlier this month, the company exposed it had actually offered $21 billion worth of its securities at an approximately $1.8 billion loss and stated it required to raise $2.25 billion to fulfill customers’ withdrawal requirements and money brand-new loaning.
The future of SVB stays unpredictable, despite the fact that deposits were eventually backstopped by the federal government and SVB’s government-appointed CEO tried to assure customers the bank stayed open for organization.
Marriott stated there is “still a big question mark regarding what bank or firm or set of firms is going to replace SVB in terms of providing those utility-like services for technology, giving them bank accounts, allowing them to make payroll, holding their cash balances.”
The SVB collapse has actually likewise raised concerns over the possible effects for other banks, with SVB being far from the only lending institution that has actually come under stress. Swiss financial investment banking titan Credit Suisse was saved by its primary competitor UBS in a government-backed, cut-price offer recently.
Marriott likewise attended to tech IPOs and their outlook for2023 Europe’s tech going public market has actually been mostly closed due to a confluence of market pressures, consisting of greater rates of interest, that make the future cashflows of high-growth tech business less appealing.
Marriott stated he would have been more positive about a healing in tech IPO activity 2 weeks earlier.
“I’m still hopeful that we’ll see tech IPO activity in 2023. And if we don’t, I think 2024 will be a big year for tech IPOs,” Marriott stated.
“I think what we’ll see is the more established profitable companies come first, so the easier-to-understand business models, profitable companies, before we see the really highly valued profit or negative profit companies that we saw in 2021.”
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