Silicon Valley Bank Under FDIC Control

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Silicon Valley Bank shares fell 80% today and in after-hours trading from where they were at the beginning of yesterday. 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. Customer deposits including Peter Thiel’s Founder Fund companies pulled deposits from the bank. SVB has mostly startup customers.

The bank was selling $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.

SVB announced the plans at the same time that crypto bank Silvergate was announcing that it was winding down operations.

Silicon Valley Bank had a confusing and not reassuring press release.

UPDATE:
California regulators closed down the tech lender and put SVB in control of the US Federal Deposit Insurance Corporation. The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors. The FDIC is an independent government agency that insures bank deposits and oversees the financial institutions.

There is discussion of a government bailout of Silicon Valley Bank.

3 thoughts on “Silicon Valley Bank Under FDIC Control”

  2. The big problem with SVB is only 5% of their deposits are FDIC insured whereas for larger retail banks like Chase, Citi, BofA, etc. that number is >50%.

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