According to several Media outlets, SVB Financial, the parent company of Silicon Valley Bank, is in discussions to sell itself.
The bank’s attempts to raise capital have failed, according to the sources, and the bank has recruited consultants to investigate a possible sale.
SVB is being considered for acquisition by large financial institutions. Nevertheless, deposit outflows are significantly surpassing the selling process, making a meaningful appraisal of the bank by possible purchasers difficult, according to the sources.
SVB’s stock dropped 60% on Thursday after the bank disclosed a proposal to raise more than $2 billion in capital on Wednesday evening. The stock dropped another 60% in premarket trade on Friday before being suspended due to awaiting news. The shares remained suspended when they did not open for trade with the rest of the market at 9:30 a.m. ET.
SVB planned to sell $1.25 billion in ordinary stock and another $500 million in convertible preferred shares, according to a proposal unveiled on Wednesday.
According to a regulatory filing, SVB also announced a contract with investment company General Atlantic to sell $500 million of common stock; however, that agreement was subject to the closure of the second common stock sale.
SVB is a significant bank for venture-backed firms, and one of the reasons it was trying to acquire more capital was cash burn from customers.
Yet, increasing interest rates, recession worries, and a downturn in the market for initial public offerings have made it more difficult for early-stage enterprises to secure more funds. As a result, the businesses seem to have drawn down on their savings at banks such as SVB.
On Thursday and Friday, experts on Wall Street said that the problems at SVB would not have a big effect on the rest of the financial industry.Morgan Stanley said in a client note that SVB’s problems were “extremely idiosyncratic.”
SVB also said on Wednesday that it sold $21 billion in securities to get cash and move its balance sheet toward shorter-term assets that are less vulnerable to rising interest rates. SVB calculated that the deal cost it $1.8 billion.
