Markets with Madison: ‘Stressed’ Kiwi firms have $171m in SVB, Crimson rips funds out just in time

New Zealand companies have at least NZ$171 million collectively deposited with the failed Silicon Valley Bank, with others including Crimson Education participating in a run on the bank just before it became the largest United States finance failure since 2008.

Icehouse Ventures chief executive Robbie Paul told Markets with Madison Kiwi-owned start-up companies, including a handful of its portfolio companies, likely had “in the order of NZ$100m” caught up in the collapse (not including listed companies such as Rocket Lab’s $61.9m), and did not know how much of it they would be able to recover beyond the US$250,000 deposit insurance scheme.

“Most of the companies are fortunate to also have capital in New Zealand or have repatriated some of that capital.

“[So] I don’t anticipate any immediate crashes from companies, but there’s a very high level of stress with a few of them.”

Markets with Madison understands Kiwi Jamie Beaton’s company Crimson Education did bank with Silicon Valley Bank (SVB) but withdrew all its deposits just 30 minutes before withdrawals froze.

The US government announced on Monday morning NZT, that all Silicon Valley Bank clients would have access to funds, according to the Associated Press.

New-Zealand founded firm Rocket Lab had US$38m (NZ$61.9m) deposited with SVB, which was 7.9 per cent of its total cash reserves, a company spokeswoman said in a statement.

“92 per cent of Rocket Lab’s cash and cash equivalents are held by other financial institutions, so we are not facing a liquidity issue and do not expect it to impact our operations at this time.”

Other listed New Zealand companies are also affected. Comvita’s US skincare joint venture Caravan Honey banked with SVB and has around US$2.5m (NZ$4.07m) deposited, while ikeGPS’ had US$3.2m (NZ$5.3m) of its total cash reserves held at SVB.

“At this time, we clearly cannot estimate the extent to which we will fully recover our cash on deposit at SVB.” Ike chief executive Glenn Milnes said in a market update on Monday morning.

“At this stage we cannot access our monies,” Comvita said in a market update on Monday morning.

SVB was the 16th largest bank in the US with US$209 billion in assets at the time of its collapse on March 10.

It was a prominent lender to start-ups in the Silicon Valley community.

The collapse triggered a sell-off across US banking sector stocks, with small US banks suffering record single-day declines.

Beyond the collapse, it’s a big week for Wall Street, with US consumer and producer inflation data due to be released.

Craigs Investment Partners investment director Mark Lister shared his expectations for the trading week on Markets with Madison.

Get investment analysis and insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.