- Shares of SVB Financial plunged 60% on Thursday after the bank announced plans to raise more than $2 billion in capital. Shares plunged 60% in the premarket on Friday before being halted — and shares never reopened for trading.
- Sources told CNBC’s David Faber that the bank was looking for a buyer after efforts to raise capital failed.
- Financial regulators shut down Silicon Valley Bank on Friday and took control of its deposits.
SVB FinancialThe parent of Silicon Valley Bank was unable to find a buyer before regulators shut it down before running the bank.
Sources previously told CNBC’s David Faber that deposit outflows are holding back the sale process, making it very difficult for potential buyers to realistically assess the bank.
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Sources told Faber that SVB was trying to find a buyer and hire advisors after the bank failed to raise capital.
The bank’s shares plunged 60% on Thursday after SVB announced plans to raise more than $2 billion in capital on Wednesday evening. The stock fell 60% in premarket trading on Friday before being halved. Shares never reopened for Friday trading.
under the terms of a Plan Released on Wednesday, SVB was looking to sell $1.25 billion in common stock and another $500 million in convertible preferred shares.
SVB also announced an agreement with investment firm General Atlantic to sell $500 million of common stock, although the agreement was contingent on the closing of other common stock offerings, according to a securities filing,
SVB is a leading bank for venture-backed companies, and cited consumption of cash from customers as one reason it was looking to raise additional capital.
However, rising interest rates, recession fears and a slowing market for initial public offerings have made it difficult for early-stage companies to raise more cash. This has apparently prompted firms to reduce their deposits with banks like SVB.
Wall Street analysts said Thursday and Friday that trouble at SVB is unlikely to spread widely to the entire banking system. Morgan Stanley said in a note to clients that the SVB issues were “highly specialised”.
Also on Wednesday, SVB announced it sold $21 billion worth of securities to raise cash and rebalance its balance sheet toward shorter-term assets that are less affected by rising interest rates. SVB estimated that it lost $1.8 billion on that sale.
Credit: www.cnbc.com /