Unease is spreading across the financial world as concerns about the stability of Silicon Valley Bank prompt prominent venture capitalists including Peter Thiel’s Founders Fund to advise startups to withdraw their money.
The turmoil followed a surprise announcement from Santa Clara, California-based SVB that it was issuing US$2.25 billion of shares to bolster its capital position after a significant loss on its investment portfolio. The stock plunged 63 per cent in premarket trading in New York on Friday before trading in the bank’s parent was halted with news pending. They declined 60 per cent the day before. Its bonds posted record declines, igniting a broad selloff in bank shares around the world.
SVB Financial Group Chief Executive Officer Greg Becker held a conference call on Thursday advising clients of SVB-owned Silicon Valley Bank to “stay calm” amid concern about the bank’s financial position, according to a person familiar with the matter. In its note to companies, Founder Collective said: “Over the long term, we don’t believe that deposits are likely at risk, but the shorter term is hard to predict.”Garry Tan, the president and CEO of Y Combinator, warned its network of startups that solvency risk is real and implied they should consider limiting their exposure to the lender.
Some VCs said they were standing by the bank. “It is truly unfortunate that several GPs and companies are making a tough situation for SVB worse by pressing the panic button,” said G Squared founder Larry Aschebrook. “SVB has supported entrepreneurs and GPs at all stages of their businesses and that partnership should run both ways.”
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