SVB Financial falls 60% as tech bank wants to raise more money

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SVB Financial falls 60% as tech bank looks to raise more cash

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In this image illustration of the Trading View stock exchange chart of SVB Financial Group seen shown on a mobile phone with the SVB Financial Group logo design in the background.

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Shares of tech-focused bank SVB Financial plunged by 60% on Thursday after the business revealed a strategy to raise more than $2 billion in capital to assist balance out losses on bond sales.

Trading in the stock was stopped for volatility numerous times throughout the session, and the drop brought SVB’s market cap listed below $7 billion.

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SVB Financial fell dramatically after the bank revealed a strategy to raise more money.

The business stated in a letter from CEO Greg Becker on Wednesday that it has actually offered “substantially all” of its available-for-sale securities and was seeking to raise $2.25 billion in between typical equity and convertible favored shares.

Investment fund General Atlantic has actually currently dedicated to contribute $500 countless that overall, the letter stated.

The sale of securities will lead to a post-tax incomes loss of $1.8 billion, SVB’s letter stated, however the business included that its strategy to reinvest the profits need to be “immediately accretive” as the bank improves its balance sheet.

The business stated in a discussion that it sold $21 billion in available-for-sale securities. The available-for-sale securities at the end of the 4th quarter were primarily U.S. Treasurys, according to a securities filing. The business likewise formerly reported more than $90 billion in held-to-maturity securities.

The Federal Reserve has actually strongly treked rate of interest over the previous year, which can trigger the worth of bonds to fall– especially those that have several years to maturity. SVB stated it is reinvesting the profits from its sales into shorter-term properties.

The bank mentioned greater rate of interest and “elevated cash burn from our clients” as factors to raise the brand-new capital. The company is greatly included with start-up business, stating on its site that almost half of all venture-backed tech and life science companies in the U.S. bank with SVB.

Wells Fargo bank expert Mike Mayo stated in a note to customers that SVB’s concerns seemed triggered by “a lack of funding diversification.” Higher rate of interest, worries of an economic crisis and a warm market for going publics have actually made it harder for start-ups to raise extra capital.

The significant decrease for SVB comes soon after cryptocurrency-focused bank Silvergate revealed liquidation strategies. SVB stated in its letter that it has very little direct exposure to crypto.

— CNBC’s Michael Bloom added to this report.