UK tech reassures investors on SBV exposure

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  • Government and Bank of England Facilitate £1 Sale of SBV UK HSBC
  • SBV has been a key bank for many firms now struggling to understand their exposure to risk.

A number of technology companies listed on the London Stock Exchange were quick to reassure investors on Monday morning after it was confirmed that HSBC would buy the bankrupt UK arm of Silicon Valley Bank.

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The £1 deal, backed by the government and the Bank of England, means all customer deposits are protected and the lender’s customers will be able to access their money and banking services as usual from today.

HSBC Group chief Noel Quinn told investors the deal made “great strategic sense for our UK business, adding that SBV UK clients can be safe in the knowledge that their deposits are backed by the strength, safety and soundness” of the banking giant. .

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SBV has been a key bank for many tech firms now struggling to understand their risk exposure.

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The collapse of its parent company was triggered after a tech investor crystallized a $1.8bn (£1.5bn) loss on a bond portfolio valued at $21bn, scaring investors and customers and sparking a run on the bank .

Interactive Investor’s head of investment, Victoria Scolar, said: “A tech lender analyzed interest rates last year and miscalculated the expected level of Fed rate hikes, causing the lender to suffer heavy losses.

“On top of that, rising funding costs and volatile financial markets that caused an IPO shortage have made life difficult for many of SVB’s clients, start-up tech start-ups, who have started withdrawing deposits, putting pressure on SVB.”

The UK government has struggled to contain the effects of the SVB crisis, which threatens to destabilize the ranks of the UK tech sector.

HSBC said SVB UK has around £5.5bn in loans and around £6.7bn in deposits, and its tangible capital is expected to be around £1.4bn.

The bank added: “The final calculation of the profit from the acquisition will be provided in due course. The assets and liabilities of SVB UK’s parent companies are excluded from the deal.”

SBV UK made a pre-tax profit of £88m for the year ending 31 December.

Concerns about the impact of the SBV collapse on the UK tech sector sparked a flurry of updates on the London Stock Exchange on Monday as groups calmed investors.

Polarean Imaging has been forced to request that trading of its common stock on AIM be temporarily suspended “while it seeks further clarification” regarding its exposure to SVB’s demise.

The medical technology company said it had a total cash balance of $13.9 million as of February 28, 2023, of which $12.4 million is held through SVB and $9.8 million of that amount is held in money market mutual fund accounts. managed by other financial institutions. Wells Fargo holds $1.5 million in cash.

“In addition, the company has $1 million in SVB’s checking account and $1.6 million in SVB’s GBP checking account. The US Federal Deposit Insurance Corporation guarantees deposits of $250,000 in the US.”

Naked Wines said it does not expect losses from the collapse of SVB, which it settled on, adding that it has “reliable liquidity” of £32m in gross cash.

Group Chief Executive Nick Devlin said: “Today we are announcing that day-to-day operations are unaffected and we do not expect any loss as a result.

“While this situation remains fluid, we maintain a strong balance sheet with approximately £185m in shares and £17m in cash available for immediate use.”

RWS Group, which is listed on AIM, said it “believes” it has “limited impact on SVB,” confirming the outlook presented in its recent AGM report, with the firm still expecting to earn adjusted earnings before tax for all year according to the market. expectations.

He added: “The Group remains well positioned to continue with its strategy with the added benefit of a strong balance sheet as net cash stood at £71.9m as at 30 September 2022.”

The government will welcome this, given that a looming crisis could overshadow Budget Day.
Suzanne Streeter, Hargreaves Lansdowne

Pharmaceutical technology provider Diaceutics CEO Peter Keeling said: “We are rapidly working to ensure the financial sustainability of the business in the face of these unprecedented events.

“We continue to trade actively, expanding our client relationships, expanding our significant new business opportunity portfolio and strong receivables and orders portfolio. We hope to be able to lift the suspension of our shares once our funding position has been secured.”

Meanwhile, THG, Cornerstone FS, Auction Technology Group and Science Group were among the companies that said they did not have significant influence over the bank.

Hargreaves Lansdown’s head of finance and markets, Suzanne Streeter, said HSBC’s takeover of Britain’s SBV “should end the nightmare that thousands of tech companies have experienced over the past few days.”

She added: “The government would very much welcome this, given that a looming crisis could overshadow Budget Day, as big bailouts for the tech sector wouldn’t be a good idea when millions of people were told they didn’t have much extra money to ease spending. life crisis.

“SVB has been seen as the lifeblood of the tech industry, offering services to startups that have been hard to come by elsewhere in the market, so while the immediate liquidity nightmare looks set to go away, there is still concern about banking options.”

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