Stock erosion of over 60% for the Silicon Valley Bank puts its Venture Capital Clients in a spot of bother as $80 million wipes out. The bank, on Wednesday, 8th March 2023 had launched a sale of its shares worth $1.75 billion to cover up for the losses it sustained by the sale of a $21 billion loss making bonds that comprised mostly the binds of U.S. Treasuries.
What happened to Silicon Valley Bank?
The shares of the bank tanked more than 60% on Wednesday as it went ahead with its sale of $1.75 billion dollars to cover up for the shortfall of $1.8 million which was sustained by the sale of a $21 billion loss making bonds that comprised mostly the binds of U.S. Treasuries. The portfolio was grossly underperforming for quite some time now as it yielded an average return of 1.79% against the current Treasury yield of 3.9% for the 10 year bonds.
What is the example that Silicon Valley Bank set?
The Silicon Valley Bank fiasco brings forth concerns of the U.S. treasury Bonds and the current risks associated with the entire sector. The Bank is not the only one going through such a slump, but financial institutions like First Republic, a San Francisco-based bank too tanked more than 16%.
Is the Silicon Valley raise making institutional investors nervous?
Several top venture capital firms, including Coatue and Founders Fund, have suggested to some portfolio companies that they strongly consider pulling money out of SVB, as concerns grow over the bank’s stability. Some venture capitalists and founders confirm that they’ve struggled to move their money. “We’ve tried to do some wires that have been stuck in limbo for over two hours,” explains Ryan Gilbert, founder of venture firm Launchpad Capital. In a follow-up call, Gilbert said that he finally had reached someone at SVB, which seemed to “unplug things” and most of the wires had now gone through.
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