Shares of Silicon Valley Bank are down sharply Thursday in the wake of the company’s announcement that it is raising additional capital by selling stock, taking a charge to roll over an asset portfolio to higher-yielding assets and extending its term borrowing capacity.
Given recent banking-related carnage in the tech and tech-adjacent worlds, there’s concern in the market that not all is well at SVB. Company CEO Greg Becker said in a call with venture clients that their assets are safe and that the stock sale was announced as an attempt to increase financial flexibility, strength and profitability at the bank.
Becker said the bank has “ample liquidity” to support its clients “with one exception: If everybody is telling each other that SVB is in trouble, that will be a challenge.” The executive asked VC clients to “stay calm. That’s my ask. We’ve been there for 40 years, supporting you, supporting the portfolio companies, supporting venture capitalists.”
The bank’s share price has fallen more than 60% at time of publication compared to last year.
In its investor presentation relating to its various financial moves shared last night, the company noted that venture capital firms were investing less, and that startup clients were still burning — consuming — cash at a historically elevated level. The mismatch led to what the company described as pressure to its “balance of fund flows.”
TechCrunch is hearing from some founders and investors that startups are being encouraged to consider pulling funds from SVB due to concern about its health; if many do, their actions could exacerbate the mismatch in deposits and withdrawals, perhaps extending the pressure that SVB is under.
Per SVB’s mid-quarter update, the company made an argument in chart form that it has a low ratio of loans to deposits, at 43%. How much protection that can provide in the wake of a share-price selloff and concern among its core customer base will become clear in the coming days.
TechCrunch is actively reporting on industry response to the SVB news and selloff, especially regarding how startups are choosing to react. More to come.
If you have a juicy tip or lead about happenings in the venture world, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests will be respected.
