Silicon Valley startup bank in crisis

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Concerns that the modern bank is being run by Silicon Valley Bank, the financial institution used by many high-profile VC-funded tech companies, spread across markets this week as banks serving the tech sector struggled amid concerns over higher interest rates. and economy.

On Thursday evening, parent company Silicon Valley Bank lost 60% of its value after announcing it was trying to raise more than $2 billion in capital. The stock continued to fall on Friday morning and trading was eventually halted. The bank was looking for a buyer after it failed to raise funds, according to CNBC.

Some VCs have asked companies they have invested in to withdraw their money from the bank, while others have called for calm, according to Axios.

Shares of major financial institutions such as Bank of America, Citigroup and JPMorgan were not immune to market conditions, falling 4-6%.

Billionaire and hedge fund manager Bill Ackman suggested in a series of tweets reported by CNN that Silicon Valley Bank might need help.

The concern in the banking sector is the ongoing struggle of the US Federal Reserve System with inflation. As the Fed raises its benchmark interest rate, the value of bonds, usually a stable asset, begins to fall. This isn’t usually a problem, but when depositors become alarmed and start withdrawing their money, banks sometimes have to sell these bonds before they mature to cover the outflow of deposits.

Silicon Valley Bank CEO Greg Becker advised investors to “keep calm” on Thursday, according to The Information, warning that the bank “has enough liquidity to support our clients, with one exception: if everyone tells each other that SVB is in trouble, it will call.”

Meanwhile, there has been a bloodbath in the tech sector in recent months as nearly every major company — from Salesforce and LinkedIn to Twitter and Meta — has made significant headcount cuts.

This is an evolving story.

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