Silicon Valley Bank in Talks to Sell Itself After Failed Capital Raise: Report

Silicon Valley Bank (SIVB) is reportedly seeking external acquisition after its efforts to raise over $2 billion in capital have failed.

Shares in the bank were down 62% in pre-market trading on Friday, for which trading has now been halted.

• According to CNBC’s David Faber, Silicon Valley Bank has “hired advisors to seek a sale,” a result which is “not unexpected.”
• The bank’s stock plummeted 60% on Thursday after it announced a planned total raise worth $2.25 to “strengthen its financial position” and “reposition” its balance sheet. 
• This included plans to sell $1.25 billion in common stock, $500 million of convertible preferred shares, and another $500 million common stock sale to General Atlantic (which was contingent on the success of the previous common stock sale). 
• SVB also sold “substantially all” of its Available for Sale securities portfolio with the intention to reinvest the money, which it said would realize an earnings loss of $1.8 billion. 

• “You would expect, given the inability to raise capital, and the fact that deposits are fleeing this thing at an incredibly rapid rate, that they would then go to say ‘okay, can we get sold?’,” said Faber.

• PayPal co-founder Peter Thiel’s Founders Fund advised companies to withdraw money from SBV yesterday over concerns surrounding its financial stability. 
• Faber added that there are “large financial institutions” that are considering a possible buyout, though there are no guarantees that will occur. 
• The bank’s CEO, David Becker, has now asked clients to “stay calm” amid the market panic, according to Bloomberg. 
• Other banks including First Republic and Signature Bank are now down 15% and 12% respectively on the day.  
• Grit Capital CEO Genevieve Roch-Decter said on Twitter that if the VC and tech-focused SVB were to fail, it would be the second-largest bank failure in U.S. history.

Featured Image Courtesy Of CNBC.