Global stock markets fail to recover after several sessions of decline sparked by fears of a banking crisis in the US. The collapse of Silicon Valley Bank (SVB) in less than 48 hours continues to raise eyebrows among tech players. Illustrations by our consultant Bernard Deitch.
Genesis regression
Wednesday, March 8th SVB He tried to put stocks and convertible bonds on the market, but found no takers, which caused panic among investors and customers.
$1.25 billion in business
$500 million transferable preferred**
The tech sector has been suffering for several months now from not being able to raise as much money as in previous years (QE is over!). For its part, the Fed has been raising interest rates, with monetary policy tightening squeezing banks’ margins.
Thus, the Fed, trying to fight inflation, prompted clients of these banks to invest liquidity in better paying and less risky financial products.
SVB It sold more than $21 billion in securities to restore liquidity by devaluing $1.8 billion from its balance sheet in the process.
When ratings agencies S&P and Moody’s announced their intention to downgrade, no counter communication was organized and the bank did not show transparency, which markets hated. Thursday, March 9, shares fell to $82.50, down 66%.
All these facts prompted venture capitalists to order their investments to withdraw their funds as soon as possible, hence the bank’s Thursday statement.
plot and macro
For 3 days, we saw a downward movement not seen since 1987 over such a short period. (For example, 2-year Treasurys rose from 5 to 4.27% over this past weekend
Evidence that markets are taking this shock seriously, despite emergency measures put in place by the FDIC and FED to protect depositors.
Back to this weekend’s highlights on the file
The SVB UK subsidiary has been the subject of takeover negotiations.
Lloyds Bank, Bank of London, Barclays and Royal Fund of Abu Dhabi tried to take control of it, and finally HSBC triumphed by announcing its takeover on Sunday night for £1 and partial assumption of debt and assets.
In addition to the simple acquisition of Rishi Sunak, the British Prime Minister and incidentally a former Goldman Sachs banker, this also means a financing bank to attract the most successful technology companies created in Europe to the UK.
And now what will happen to the other affiliates of the SVB editor’s note (Israel, Canada, China, Denmark, India and of course the USA)
there Federal Reserve The US branch of SVD is up for auction, with bidders required to submit their bids before Sunday, March 19.
For the rest of the world no comment…
Sunday evening FIDC and the Federal Reserve They announced that they guarantee deposits for SVB clients (above $250,000) and a similar procedure for Signature Bank of NYC.
Compared to previous situations (Lehman in 2008), there are no proven toxic financial products or scams and dismantling should be faster.
It remains to be seen how the US tech ecosystem will be able to survive this crisis financially, as SVB is the cornerstone of many funding operations along with venture capital funds, moreover in an open forum of more than a hundred CEOs. American venture capital firms (including the largest such as Accel Partners or General Catalyst) have supported SVB By emphasizing the importance of the bank in the ecosystem and the domino effect created by the method of financing if the bank is not saved
When asked about the possibility of a number of these funds acquiring a stake in SVB to save it, no one wanted to comment at the moment.
SVB Being in a lot of syndications for loans (with other banks) or equity stakes besides money, many operations are in danger of going out of business after such bankruptcy.
Along with the French government, Jean-Michel Barrow The (Minister of Digital Transformation) monitors the loan file even if “it seems that a few French technologies located in the United States have been affected in their operations by this bankruptcy.”
I am sure there will be a meltdown among under-capitalized companies or those with an uncertain revenue model and inevitably focused on technology in the coming weeks, and some will find themselves short-term financing and at the mercy of their competitors or banks. Funds specializing in accumulations and distressed assets
By Bernard Deitch
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