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
When it comes to the large scale, of nations and capital, the individual doesn't matter - they never did. Nothing has changed since we settled down thousands of years ago and started making pretty things and called them 'valuable'.
Sure, there will be insiders, or people who will luck out, but I'm not one of them. I don't have a magic 8 ball.
www.bbc.co.uk/news/business-64937251
So of course, the two sides had to talk and come to an agreement. Inflation is still rampant, additional rate hikes are needed, meaning even more long-term treasuries will be devalued, meaning even more banks will get into trouble.
We're no where close to solving the inflation problem. We've come down from 9% down to 6%, but its still a long way to go to get to 2%. The US Treasury shoring up banks + extending new forms of loans + trying to give more confidence today is obviously trying to set up the Fed to continue the rate hikes / continue the monetary destruction to get inflation back in place. Before this whole event, the market expectation was +50BPS of more raises come March 22nd, but the Fed may slowdown to 25BPS, or even 0BPS to give banks more time to figure this crap out.
This "SIVB" issue is larger than just SIVB, so additional discussion points are probably going to drift off topic / less newsworthy. The other topic might be a better environment for further discussion (as we'd be more open to talk more about other issues that may be related).
If any bank has a mark-to-market loss with its long term holdings, the Fed is offering a loan to cover those banks for up to a year. That means that any bank run won't cause a collapse until that new loan from the Fed fails. (The loan means that the bank still loses money to the Fed, but at least has enough short-term cash to pay out depositors in the case of a bank-run).
Fed, not Treasury btw. In these cases, its important to remember that the Fed and Treasury are completely different entities with different motivations / charters.
So its a bit too soon to call this a "Certainty". I'm just trying to understand the news right now. I may have misread / misunderstood the terms of this loan.
I just hope that we don't hit rock bottom.
Suffice it to say, the next few weeks are going to be very interesting to say the least. I wonder how many more banks are going to fail.
Then let's factor in how the cost of living for the average American is spiraling out of control. We've got something nasty brewing here.
www.marketwatch.com/story/credit-suisse-shares-fall-to-new-record-low-after-collapse-of-svb-and-signature-bank-3919ffc7
Of course if you use Bank of America or one of the other big guys you're unlikely to have such problems... but then again, the same was thought of Lehman Brothers
For now the problems seem to be of the "simple" variaty, money tied up puts the bank at risk of a run. Tbd if worse things come up
Moody's, which rated Signature Bank's subordinate debt 'C', said it was also withdrawing future ratings for the collapsed bank.
The banks placed under review for downgrade are First Republic Bank (FRC.N), Zions Bancorporation (ZION.O), Western Alliance Bancorp (WAL.N), Comerica Inc (CMA.N), UMB Financial Corp and Intrust Financial Corporation, Moody's said.