On March 10, 2023, people were discussing about the issues that Silicon Valley Bank (SVB) is facing. The company’s stock fell more than 60% in the last 24 hours because SVB had to sell off a $21 billion bond portfolio at a loss of $1.8 billion. Despite this problem, SVB CEO Greg Becker said that everything will be fine and their financials are still strong. SIVB stock was halted during Friday premarket trading due to an upcoming announcement from SVB.
Silicon Valley Bank’s Stock Tumbles 60%
Life can be hard, especially when we are faced with difficult challenges. But if we stay strong and work through them, we can eventually reach success. We must also learn from our mistakes and use the lessons learned to make better decisions in the future. No matter what life throws at us, we should never give up and never stop believing in ourselves. By staying focused on our goals and not letting negative thoughts bring us down, we can find strength to handle almost any situation that comes our way.
Silicon Valley Bank (SVB) is causing a lot of buzz in the financial world after Silvergate Bank announced that they’re going out of business. On Thursday, SVB’s stock tumbled more than 60%. People are familiar with SVB because it provides lots of investments for tech startups. Unfortunately, their investments have gone down by almost a third in the past year. Also, customers have been spending money quickly which means that SVB has to use much more cash than usual.
So, SVB sold its bond portfolio for $21 billion and lost a total of $1.8 billion in the process. Their CEO Greg Becker said that it was necessary to do this because they think interest rates will be higher, people and businesses won’t have as much money, and their clients won’t require as much money either. Once the balance between investing money and spending money is restored by these activities, then SVB will be able to make more profit quickly.
It has been reported that SVB made some bad financial choices before the Federal Reserve increased interest rates. This included investing in US Treasury bills which was not returning enough money to cover how much they were spending. The value of these bonds dropped significantly because of the rate increases, and people began taking out their money from bank deposits at a fast pace. Some experts think if things keep going this way, it might result in a financial collapse as big as when Washington Mutual (Wamu) went bankrupt.
Arthur Hayes, who is a co-founder of a company called Bitmex, joked that Federal Reserve Chair Jerome Powell might have damaged the United States banking system. He said if something bad happens, it would be similar to what happened in March 2020 when the stock market dropped and the government did a big bailout for banks. Billionaire Bill Ackman suggested that government should also give help to another bank called SVB.
“The collapse of [SVB] could be very bad for the economy in the long run because a lot of businesses need loans and money to operate, which they usually get from SVB. But if private companies can’t fix this problem, maybe the government should step in and provide money – even though that might mean that people have to give up some of their rewards. After what happened when JPMorgan bailed out Bear Stearns, it seems unlikely that another bank will try to help SVB.”
On Friday, the stock for SIVB bank was expected to be quite unpredictable. The trading was stopped before it could even start. Later, the bank said that they would tell us something soon. This situation with SVB is similar to what happened with Lehman Bank and Credit Suisse and Deutsche Bank last year when their values were really low.
Recently, S&P reduced the rating of Silicon Valley Bank (SVB) to almost a ‘not good’ rating. Professionals at DA Davidson said that companies are having difficulty with slower money-raising and because of rules set up by the Federal Reserve (called “Quantitative Tightening” or QT). David Faber from CNBC reported that SVB is trying to find someone who will buy them.
Do you think Silicon Valley Bank and other U.S. financial institutions are going to have a good or bad future? How could their successes or troubles affect the economy and tech businesses? Let us know what you think in the comments!