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This is not a perfect analysis, but: - Roku has 487M in SVB - After the 8-K released, Roku lost 323M in market cap Basically, the market is expecting around

by k8t 4y ago

This is not a perfect analysis, but: - Roku has 487M in SVB - After the 8-K released, Roku lost 323M in market cap Basically, the market is expecting around 30c of value recouped for every dollar inside of SVB. (note: I know this analysis isn't perfect, but it gives a rough idea)

tedunangst 4y ago
I'd be pretty happy to buy SVB deposits at 30c if I could do that without exposure to Roku everything else, etc.
zamadatix 4y ago
The market expects the bank going under to impact Roku by that much expected value. That's very different than saying the market expects a certain percentage of money to be returned in the end and it's not clear why this is supposed to give even a ballpark estimate of the expected recoup. After all the share price has way more to it than what the current assets come to. It's also very likely the market changes its mind shortly, especially if Roku lays out the plan and expected impact to operations in more detail.
- frankchn 4y ago
  The drop is in the aftermarket immediately after the 8-K release, so I think we can attribute most of it to the market's gut reaction to this piece of news and not the broader SVB impact (which would have occurred during market hours). Agree that the market might change its mind quickly, especially if estimated recoveries are projected to be high or the depositors completely made whole.
  - hackernewds 4y ago
    Assuming the markets are rational ;) we take it as an axiom, but that is different than saying expectations are always priced in
    - Kamq 4y ago
      > Assuming the markets are rational ;) I mean, they are on a long enough timeline, but they tend to be able to stay irrational longer than you can remain liquid.
  - zamadatix 4y ago
    Absolutely it’s the reasonable cause but as explained there is a difference between the news being the expected cause and the drop being what the market thinks the assets recoup will be.
deleted 4y ago
[deleted]
FormerBandmate 4y ago
I would bet it’s 80 cents on the dollar
- zrail 4y ago
  It's exceedingly unlikely to be anything less than 99. The FDIC wants to reassure everyone so there aren't more runs. Do you really think they're going to let the eventual purchaser not make everyone whole?
  - funstuff007 4y ago
    That's a bold statement and not in line with FDIC actions for previous bank failures.
    - calgarymicro 4y ago
      Is it not? Most of the time the FDIC will find a buyer and guarantee some percentage (usually ~80%) of all losses to the purchasing bank (plus the very low upfront purchase price, of course) in exchange for them honoring all deposits. So ensuring most deposited funds are safe, at least in the long term, seems to be in line with their usual playbook, even if the unusual circumstances around this particular failure might make that less likely.
    - zrail 4y ago
      > in 55 failures since IndyMac of banks with total deposits over $1 billion, uninsured deposits were fully protected against any loss. The largest failure, Colonial Bank, had $20 billion of deposits, including an estimated $4.4 billion of uninsured deposits. https://www.cato.org/commentary/fdic-invents-costly-solution-imaginary-problem https://www.cato.org/commentary/fdic-invents-costly-solution...
      - SecretDreams 4y ago
        Meanwhile, svb had north of 160bik deposits with an estimated 93% uninsured. Scope is a bit different.
bloodyplonker22 4y ago
This is absolutely not how the stock market works. Market cap is not based on book value.
paxys 4y ago
You are making the assumption that that $1 in a company's checking account corresponds to $1 of their market cap, which is not even remotely the case. A much more believable hypothesis is that investors saw the headline, went "Roku is affected by SVB!!" and panic sold.
- mmart 4y ago
  I was under the impression that, at least to a first order, $1 in cash in a company's checking account (money that could be immediately released to shareholders) does correspond to $1 of their market cap (MC=EV-Debt+Cash [1]). Why do you think this is not the case here? [1] https://corporatefinanceinstitute.com/resources/valuation/enterprise-value-vs-equity-value/ https://corporatefinanceinstitute.com/resources/valuation/en...
  - IrnBru 4y ago
    Because that isn't a physical law.. it's a metric.

by k8t 4y ago

tedunangst 4y ago

I'd be pretty happy to buy SVB deposits at 30c if I could do that without exposure to Roku everything else, etc.

zamadatix 4y ago

The market expects the bank going under to impact Roku by that much expected value. That's very different than saying the market expects a certain percentage of money to be returned in the end and it's not clear why this is supposed to give even a ballpark estimate of the expected recoup. After all the share price has way more to it than what the current assets come to. It's also very likely the market changes its mind shortly, especially if Roku lays out the plan and expected impact to operations in more detail.

frankchn 4y ago
The drop is in the aftermarket immediately after the 8-K release, so I think we can attribute most of it to the market's gut reaction to this piece of news and not the broader SVB impact (which would have occurred during market hours). Agree that the market might change its mind quickly, especially if estimated recoveries are projected to be high or the depositors completely made whole.
- hackernewds 4y ago
  Assuming the markets are rational ;) we take it as an axiom, but that is different than saying expectations are always priced in
  - Kamq 4y ago
    > Assuming the markets are rational ;) I mean, they are on a long enough timeline, but they tend to be able to stay irrational longer than you can remain liquid.
- zamadatix 4y ago
  Absolutely it’s the reasonable cause but as explained there is a difference between the news being the expected cause and the drop being what the market thinks the assets recoup will be.

deleted 4y ago

[deleted]

FormerBandmate 4y ago

I would bet it’s 80 cents on the dollar

zrail 4y ago
It's exceedingly unlikely to be anything less than 99. The FDIC wants to reassure everyone so there aren't more runs. Do you really think they're going to let the eventual purchaser not make everyone whole?
- funstuff007 4y ago
  That's a bold statement and not in line with FDIC actions for previous bank failures.
  - calgarymicro 4y ago
    Is it not? Most of the time the FDIC will find a buyer and guarantee some percentage (usually ~80%) of all losses to the purchasing bank (plus the very low upfront purchase price, of course) in exchange for them honoring all deposits. So ensuring most deposited funds are safe, at least in the long term, seems to be in line with their usual playbook, even if the unusual circumstances around this particular failure might make that less likely.
  - zrail 4y ago
    > in 55 failures since IndyMac of banks with total deposits over $1 billion, uninsured deposits were fully protected against any loss. The largest failure, Colonial Bank, had $20 billion of deposits, including an estimated $4.4 billion of uninsured deposits. https://www.cato.org/commentary/fdic-invents-costly-solution-imaginary-problem https://www.cato.org/commentary/fdic-invents-costly-solution...
    - SecretDreams 4y ago
      Meanwhile, svb had north of 160bik deposits with an estimated 93% uninsured. Scope is a bit different.

bloodyplonker22 4y ago

This is absolutely not how the stock market works. Market cap is not based on book value.

paxys 4y ago

You are making the assumption that that $1 in a company's checking account corresponds to $1 of their market cap, which is not even remotely the case. A much more believable hypothesis is that investors saw the headline, went "Roku is affected by SVB!!" and panic sold.

mmart 4y ago
I was under the impression that, at least to a first order, $1 in cash in a company's checking account (money that could be immediately released to shareholders) does correspond to $1 of their market cap (MC=EV-Debt+Cash [1]). Why do you think this is not the case here? [1] https://corporatefinanceinstitute.com/resources/valuation/enterprise-value-vs-equity-value/ https://corporatefinanceinstitute.com/resources/valuation/en...
- IrnBru 4y ago
  Because that isn't a physical law.. it's a metric.