Jittery investors got another scare on Thursday after Silicon Valley Bank announced plans for $1.75 billion in common stock and depository shares.
SVB shares lost 60.4%, the largest percentage drop since 1998, which wiped out over $9.5 billion in market value as investors speculated on the financial health of the bank which caters to the “world’s most innovative companies”, as well as “fast-growing clients” according to its own description.
This followed the bank’s disclosure of mounting losses.
“While VC deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted. The related shift in our funding mix to more, higher-cost deposits and short-term borrowings, coupled with higher interest rates, continues to pressure NII and NIM,” CEO Greg Becker wrote in a letter to investors.
The move comes after Silvergate Capital, heavily exposed to digital assets, announced plans to liquidate.
Becker, on a call Thursday, reportedly told the venture capital community to “stay calm” The Information reported. FOX Business’ inquires to SVB were not immediately returned.
JPMorgan, Wells Fargo, Bank of America and Citigroup fell in sympathy wiping out over $60 billion in market value, including SVB, as tracked by Dow Jones Market Data Group. It was the worst day for bank stocks since 2020 which fell as a group by over 4%.
The drop also weighed on the broader market with the S&P 500 down 1.8%, the Nasdaq Composite 2% and the Dow Jones Industrial Average 1.6% or 543 points.
Silvergate shares have lost 84% of their value this year.
In Wednesday’s announcement the company stated: “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward. The Bank’s wind down and liquidation plan includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”
The implosion of Sam Bankman-Fried’s FTX continues to send ripples through the crypto industry and firms with exposure. SBF is currently under house arrest awaiting trial for fraud and money laundering with billions of customer funds unaccounted for.
Bitcoin tumbled below the $21,000 level after Silvergate’s disclosure.