The TechCrunch article was written and posted before SIVB was seized and shut down.
From TechCrunch, March 9, :
It will go down in the history books about Silicon Valley: the time that its most prominent bank, a bank founded nearly 40 years earlier, inflicted such grievous injury on itself that it it had to be abruptly shut down. And why? Not because the bank was falling apart at the seams. Instead, because it utterly flubbed some important messaging at the very worst time imaginable.
This, friends, is what is called an own goal.
To quickly revisit this whole mess, Silicon Valley Bank lost $1.8 billion in the sale of U.S. treasuries and mortgage-backed securities that it had invested in, owing to rising interest rates. It owned bonds, for example, that are no longer attractive compared with more newly issued bonds, and took a financial hit on these. The bank was also contending with shrinking customer deposits, given that its customer base of largely startups has far less money right now to park at a financial institution.
Because of its predicament, it decided to raise a bunch of money to safeguard its business. The plan was to sell $1.25 billion of its common stock to investors, $500 million in convertible preferred shares, and $500 million of its common stock in a separate transaction to the private equity firm General Atlantic. The apparent goal was to project that the bank was being conservative and raising this money to stabilize itself.
Oh, though, how it backfired, and who can be surprised, given it issued its announcement about these plans on Wednesday, just as the crypto bank Silvergate was announcing that it was winding down operations.
You might imagine that someone at Silicon Valley Bank would have paused to think: “Hmm, maybe today is not the right time to declare that we’re shoring up our balance sheet.” Evidently, they did not. Instead at the end of the market close Wednesday, they put out a convoluted press release that was received so badly that it was almost comical. Except that Silicon Valley Bank has long been a trusted financial partner to many startups and venture firms that began nervously scrambling to figure out what to do.
It was certainly not funny to Silicon Valley Bank’s estimated 6,500 employees or to its CEO Greg Becker, who found himself having to jump on a Zoom call late yesterday morning to assuage panicked customers that it was just a little news release!
It was not an assuring performance. “My ask is just to stay calm, because that’s what’s important,” Becker said to an untold number of viewers who were not given the opportunity to ask questions. Silicon Valley Bank has been a “longtime supporter of you, the venture capital community companies, and so the last thing we need you to do is panic,” he added, saying what no one ever wants to hear from the head of their bank....
....MUCH MORE
The absolute best thing that the regulators can do is work through the weekend to have a buyer lined up for Monday morning.
If that doesn't happen, the $150 billion+ in deposits that exceed the FDIC's insurance limit are going to be in limbo at the same time the offsetting assets are declining in value. Very not good.
Even the niche portfolio of loans to the wine business are deteriorating in value in part because many of the wineries had funds on deposit that won't be available to make payroll, among other things. In addition to the more generalized depressive effects up and down the West Coast leading, I assume, to decreased volume for the purveyors de plonk.
