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Issues at SVB, or Silicon Valley Bank, in the US have investors very worried.
In the US, SVB Financial Group scrambled to reassure its venture capital clients their money was safe after a capital raise led to its stock collapsing a whopping 60 per cent.
The share plunge contributed to wiping out over $80 billion in value from bank shares on Wall Street.
SVB, or Silicon Valley Bank, launched a $US1.75 billion share sale on Wednesday to shore up its balance sheet.
It told investors it needed the proceeds to plug a $US1.8 billion hole caused by the sale of a $21 billion loss-making bond portfolio consisting mostly of US Treasuries.
Investors in SVB’s stock fretted over whether it would be enough, given the deteriorating fortunes of many technology startups that the bank serves.
The company’s stock collapsed to its lowest level since 2016, and after the market closed shares slid another 26 per cent in extended trade.
SVB’s CEO Gregory Becker has been calling clients to assure them their money with the bank is safe, according to two people familiar with the matter who spoke to Reuters.
The problems at SVB have triggered some startups to tell their founders to withdraw money from SVB as a precautionary measure, the sources added.
One of them is Peter Thiel’s Founders Fund, according to one of the sources.
One San Francisco-based startup told Reuters they successfully wired all their funds out of SVB on Thursday afternoon, and the funds had appeared in their other bank account as a “pending” incoming wire by 4 pm Pacific Time on Thursday.
However, the Information publication reported the bank told four clients that transfers could be delayed.
SVB did not respond to multiple requests for comment.
A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets in 2022.
“While VC (venture capital) deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted,” Becker said in a letter to investors seen by Reuters.
ABC News/Reuters
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