Breaking: After Silvergate Now Silicon Valley Bank Considers Selling Itself; Who’s Next?

A prominent U.S. financial institution, the Silicon Valley Bank, is looking to sunset its operations as it considers selling itself after failing to raise substantial new funding. SVB, which was a leading bank for venture-back companies, claimed cash burn from customers as one of the reasons it was looking to raise additional funds to sustain.

Silicon Valley Bank Explores Potential Sale

Early-stage companies are finding it increasingly difficult to attract further capital because of rising interest rates, concerns about the possibility of a recession, and a downturn in the market for initial public offerings. This has reportedly caused such businesses to withdraw money from their bank deposits at institutions like SVB.

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SVB was planning to sell a total of $1.25 billion in common stock and an additional $500 million in convertible preferred shares, according to the details of a deal that was made public on Wednesday. As per a regulatory filing, SVB also declared that it had reached an agreement with the investment firm General Atlantic to sell $500 million worth of common stock. But, the completion of this agreement was dependent on the successful completion of the other common stock offering.

Following the announcement made by the firm on Wednesday evening regarding their intention to raise more than $2 billion in capital, shares of Silicon Valley Bank (SIVB) dropped by 60% the following day. On Friday’s premarket trade, the share price dropped another 60%. As things currently stand, trading of SIVB shares has been suspended citing increased volatility.

Who’s Next After SVB?

Silvergate and Silicon Valley Bank, market participants and experts anticipate a similar fate for the First Republic Bank which is under strict vigilance of U.S. authorities amid growing concerns of falling deposits. First Republic, which has its headquarters in San Francisco, caters to wealthy individuals and business owners. These are the clients who are beginning to withdraw their funds from bank accounts in search of Treasurys and other products with better interest rates.

The amount of deposits held by First Republic increased by 13% in 2022 compared to the previous year; however, the lender had to pay more for these deposits, which negatively impacted the firm’s profitability statistics. And in a move that is very similar to that of SVB, the bank recently made an announcement that it would seek new funding following the sale of significant portions of its securities portfolio. After the markets opened today, shares of First Republic (FRC) fell by over 50% and have since been halted from further trading.

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