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> The thing that broke down is they had to announce true things that made investors conclude that their money wouldn't grow as fast as investors expected, and i
by dahdum 4y ago
> The thing that broke down is they had to announce true things that made investors conclude that their money wouldn't grow as fast as investors expected, and investors (understandably / justifiably) wanted to pull it out to somewhere it would grow faster.
SVB disclosed they took massive losses from high risk, high duration assets and were desperate for cash. Investors took large (up to 60% over 24h!) losses, paper or otherwise, to get out of the stock. That can't be just concern over not growing as fast, that's concern about solvency. VC's and depositors saw the same writing on the wall, but it was SVB who wrote it there.
If they were able to cover their normal operations, they wouldn't have needed the emergency equity raise.
- borski 4y agoHigh duration, yes, but actually extremely low risk. The thing that killed SVB was the bank run. They would have been fine with the raise. Panic set in and killed them. FRB is not in a better position, but nobody is panicking, so they’ll survive.
- dahdum 4y agoDidn’t SVB directly cause the bank run that killed them though? It wasn’t some externally driven event outside the scope of risk management. The assets were fine but the high duration was the risk. They took it purposely and lost billions when their risky bets turned against them. The emergency equity raise and sale attempts were desperation, and seen as such. Doesn’t feel much different than a yield farming crypto bank going under when they are forced to fire-sale thinly traded sh*tcoins and take a beating.
- borski 4y agoPlenty of banks sell equity. General Atlantic had already agreed to purchase 500M of it, and it was the largest investor in First Republic as well.