Saturday, March 11th 2023
Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments
Technology Companies, Venture Capitalists and Startups are in panic after the collapse of Silicon Valley Bank on Friday, March 11, 2023. In the short term it will be a mess - customers of SVB have no access to FDIC insured deposits until Monday (March 13). Customers with investments below a $250,000 cap have been advised to make claims before a strict Monday deadline. The FDIC is forming plans to pay depositors, with investments greater than the aforementioned cap, a special dividend next week.
US Regulators have swooped in to recover assets from Silicon Valley Bank. This is the first failure of a North American banking group since the Great Recession of 2007 to 2009. Whispers of SVB's oncoming financial troubles were heard earlier this week, which prompted a run of withdrawals from the bank by worried customers. Regulators stated that they took swift action in order to "protect insured depositors." On Wednesday 8, SVB Financial Group, the bank's parent company, revealed plans of a sale of shares totalling $2.25 billion. This followed a reported loss of $2 billion, from the selling off of $21 billion of securities from its portfolio. The banking group had experienced slowdown from its investments in bonds.
Entertainment Streaming company Roku has revealed, via an SEC filing on Friday, that it has $487 million deposited with the crumbling Silicon Valley Bank. That sum represents roughly 26% of Roku's total cash reserves and equivalents. The company also mentioned that its investments with Silicon Valley Bank are mostly of an uninsured status. Roku said. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB." A spokesperson for Roku told Business Insider by email, "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions."
It remains to be seen how many more companies will be affected by the collapse of Silicon Valley Bank. News outlets are today reporting that Roblox Corporation, Rocket Lab and Vice Media are SVB customers. Financial analysts are keeping an eye on the resulting fallout, and predictions have been posited regarding the fragile status of certain banking groups. The US Federal Reserve, as well as other international central banks, have sharply raised interest rates and borrowing costs in attempts to dampen the effects of inflation. This has had a knock-on effect on the bond market - portfolios decline in value as interest rates rise.
Sources:
BBC News, Business Insider
Entertainment Streaming company Roku has revealed, via an SEC filing on Friday, that it has $487 million deposited with the crumbling Silicon Valley Bank. That sum represents roughly 26% of Roku's total cash reserves and equivalents. The company also mentioned that its investments with Silicon Valley Bank are mostly of an uninsured status. Roku said. "At this time, the company does not know to what extent the company will be able to recover its cash on deposit at SVB." A spokesperson for Roku told Business Insider by email, "As stated in our 8-K, we expect that Roku's ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions."
133 Comments on Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments
I swear to God that every ten or so years we have another financial crisis. What? Is ruining two generations not enough for these people? Do we need to ruin Gen-Z too?Exactly. Seriously, how did someone not know that if you hire the same guy that was instrumental in the fall of Lehman Brothers, bad things will happen.Where's my golden parachute? Oh crap, someone didn't pack it.That's what I think as well. This is just the start of a long series of dominos that will result in nothing good for the rest of us.
I just hope to God that the government doesn't bail out these fools. Free market capitalism states that if you're stupid enough to make stupid mistakes, you're stupid enough to fail. That's what needs to happen, but we all know that's not going to happen. The wealthiest people in the country are going to get a bailout on the backs of those of us that can't afford it. God, we're screwed.
Those banks should also be mega profitable during the good part of the economic cycle though, so government can get money back. It's just executive pay that should also be clawed back too...
On Tech, I really think some dark times ahead. There hasn't been any real big innovation for about 15 years... Massive and insane speculation since 2020 covid stimulus. Boom and the bust coming.
The products of the big boys have gone backwards, Microsoft, Windows and Office, Google / Ads, Facebook etc. They've lost the plot.
Hardware got inflated, no way do $1000 graphics cards sell much in tough economic times. Will round trip to pre covid stimulus price level and probably some more eventually.
SVB bonuses range from about $12,000 for associates to $140,000 for managing directors
It was more than just asking for money. They also announced a $1.8 Billion loss.So they came out, said "We lost $1.8 Billion last quarter, and are raising money tomorrow (Thursday) to cover for the shortfall". And then all their customers decided to bank-run instead while their stock price collapsed. The rest is history.
www.dailymail.co.uk/news/article-11848705/Woke-head-risk-assessment-Silicon-Valley-Bank-accused-prioritizing-diversity-issues.html
Auction for SIVB on the way.
I bid... $1.
BTW, CRO (Chief Risk Officer) in a bank is focused in the main on the bank's lending activities, ie customer side business. CFO is responsible for what the Treasury is up to, with, in some circumstances, the CRO playing a reporting role of that the Treasury is doing. But it is always through the rear mirror to provide an info update as to what was done. The CFO is fully responsible for what his team were up to. Don't let him try to abscond responsibility.
And the fact that ALL the execs sold just before collapse provides no defence that it is coincidental. It was deliberate. It means SEC regulation FD ("Fair Disclosure") applies or does not apply. The public release of information relating to the dire state of the company 48 hours prior to their trading is key.
Or did they use the sale proceeds and inject it as cash into the company to help keep it afloat? If yes, then they are good as gold.
Otherwise, They need to go to jail. Although it seems that in the US, there is often out-of-court settlements.
Depositors will be made whole, guaranteed by FDIC.
Also, Signature Bank has been taken over by FDIC. Holy crap. Apparently this was spreading, so Treasury + FDIC decided to get ahead of the game and takeover another bank while no one was looking.
Hmmm, this suggests that the problem is more serious that I expected.
So slightly different group than "taxpayers", but still basically "The American People" so to speak. The agreement is for FDIC insurance to be used on $250,000 and smaller accounts. But the Treasury has the capability to use it in circumstances like this.
I definitely get feelings of "moral hazard" out of this one. But it really depends on what the chances of a widespread catastrophe were. This is obviously one way to stop any further bank runs, since it proves that FDIC will be used to make people whole in other banks (even above-and-beyond the insured amounts).
Yeah. I dunno what to think of that. EDIT: Signature Bank also being seized today proves that there is real systemic risk here, unfortunately. So that's a 2nd bank that needed to be rescued already.
Note: this also means that the auction failed. No buyers found, and the Treasury had no reason to believe that a buyer would be found. That also suggests that Silicon Valley bank (and Signature Bank) were not just illiquid... but also insolvent.
www.investing.com/analysis/signature-bank-down-2287-as-2-banks-go-down-in-as-many-days-200636126
[SIZE=4]Signature Bank Down 22.87% At Friday’s Close[/SIZE]
The crypto-friendly Signature Bank saw its shares decline 22.87% in Friday trading and drop to $70. The day’s decline, along with the greater fall of 37.30% since Monday, is reflective both of the current concern for digital asset-friendly banks, and the worries for banks more broadly stemming from recent events.