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They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can
by FormerBandmate 4y ago
They’re selling equity to get capital. That’s pretty dire straits, FTX was doing that before they went under (I’m not saying this is FTX, I’m just saying it can be akin to the nuclear option)
- axlee 4y agoFTX's actions have nothing to do with what is happening with SVB, it's not even close. Why make a bad parallel?
- Narkov 4y agoThe parallel is selling equity when you are in trouble is not ideal. Different reasons or sectors or whatever...but the principal is the same.
- hd95489 4y agoI mean it’s just as bad as buying it at the peak.
- FormerBandmate 4y agoTheir emergency stock sale was a key sign of their implosion. Healthy financial institutions never do this
- hollerith 4y agoFor what reason besides raising cash does a company ever sell shares in itself? How does your statement make any sense? (I am assuming that by "capital" you mean cash.)
- tyre 4y agoBecause in this case it’s a bank and they aren’t selling equity to invest in new business/products. SVB had to liquidate good assets quickly, so it sold them at a loss. That means its capitalization compared to liabilities (deposits) could be in “uh oh” territory. So it sells capital on the open market to shore up its liquid capital. Yes, most every capital raise works mostly like this. But it’s notable here because of what it portends.
- deleted 4y ago[deleted]
- lmm 4y ago> For what reason besides raising cash does a company ever sell shares in itself? A healthy company doesn't generally sell shares in itself (except perhaps to fund a major expansion). Selling equity is a last resort when you don't have better funding options (retained earnings, debt, ...).