Things are going completely wrong in the tech world and especially in the United States. After it was previously announced that Silvergate Bank can no longer make ends meet, another bank is in trouble with Silicon Valley Bank (SVB). The tech bank announces the sale of a significant portion of its assets and shares in an effort to raise capital.
Stocks down 60 percent
A large part of the investors fears that it is a Silvergate scenario, because the shares of SVB fell by 60 percent yesterday. That drop wiped out $80 billion in value. Silicon Valley Bank is one of the top 20 banks in the United States and handles the banking affairs of parties such as Sequoia and Andreessen Horowitz (a16z), two venture capital firms active in the crypto world.
In a March 8 financial update, the company announced that it had to sell $21 billion worth of securities at a loss of $1.8 billion to improve its balance sheet. It also raised another $500 million from General Atlantic and plans to raise another $1.75 billion by selling its own shares.
That the problems at SVB are potentially great is evident from the words of Greg Becker, who heads the bank. Becker urges investors to “keep calm” and says the bank has “enough liquidity to help customers with one exception: if everyone told each other that SVB is in trouble, that would be a challenge.”
Will there be a bank run?
So it seems that Silicon Valley Bank can only fall if there is a so-called bank run comes. At the moment, the risk of such an action is quite high, because people still want to be on the safe side. In that respect, it will be an exciting few days for the giant tech bank.
“I believe the biggest risk for startups, venture capitalists and for Silicon Valley Bank is mass panic. A classic bank run would hurt the entire system. People publicly joke about this, but it’s not. This is serious business. Please treat it that way,” Suster said.
SVB mainly receives support from the community. The reputation of the bank is good and they have always helped startups in particular. So now it’s up to the community to support the bank at this critical time in its history.