6 ms·

For banks that are bidding, how do they know how many assets SVB had? Are they working off of data from past fillings?

by sigmar 4y ago

WJW 4y ago
SVB itself knows which assets it has, and therefore the FDIC knows. They then send out invitations to bid to banks with the list of assets as an attachment. EDIT: It's not only the assets that are being bid on, the curator could just sell those themselves. But SVB has (even now) some amount of intangible value in terms of relations with customers, built up expertise in serving startups, etc etc. A bank looking to diversify into providing banking services for startups might be willing to bid more for such expertise and customer lists than a bank which is happy with the customer base it has. So I'd expect it would be mostly the intangibles which drive the potential differences in bids, with the market price of the assets merely serving as floor.
seanhunter 4y ago
You get an excel sheet with all the assets and their current mark. Then you typically have until late sunday to put the bid in so they can resolve the bank before market opens on Monday. Source: was part of a team doing this valuation analysis over a very fun weekend in 2008 for one of the famous bank failures
- MonkeyMalarky 4y ago
  Are bidders expected to forget or "un-see" such knowledge afterwards? Or is the information not that detailed / anonymized in some way?
  - drexlspivey 4y ago
    Why would they need to un-see it?
    - bunabhucan 4y ago
      Competitive advantage. If bigTechA and bigTechB discuss merging there will come a point in the due diligence where certain employees are asked to review competitive secret sauce of the other company with the understanding that if the merger unravels for some reason they will have to take a package and stop working for their current employer. I can't imagine the mbs/loan portfolio is that proprietary though.
      - qbasic_forever 4y ago
        SVB is dead. The company has failed. There is no competitive advantage because SVB is not in competition anymore, it is dead. The former SVB employees are sticking on for 45 days (at 1.5x pay) to tie up loose ends according to the FDIC. But SVB is dead, the assets are being sold and might as well be public record at this point.
        nwatson 4y ago
        Isn't there goodwill value left over because of relationships and institutional knowledge, even after SVB is stripped of assets and after debt is accounted for? Might some larger bank retain that operation and return some value to taxpayers?
        700000thMistake 4y ago
        [dead]
        youngtaff 4y ago
        Goodwill is the difference in value between the assets of a company and the price an acquirer paid for a that company
        drexlspivey 4y ago
        Their liabilities are greater than their assets, there is no equity value left. Someone can acquire them for $1 if they want to assume their liabilities.
  - seanhunter 4y ago
    The data is full detail. You know if you don't put the winning bid in that one of your competitors are holding those assets, and in certain cases even know who is holding it [1]. In this case it doesn't really matter that much because most of the assets that caused the problem are not the loans but the MBS that SBV bought because it had massively increased deposits and couldn't find enough eligable borrowers to lend out to.[2] [1] For various reasons it's not just "the winning bidder holds all the stuff". There's a lot of horse trading where people buy chunks of it and the winning bidder gets the rest. This is important from a TBTF point of view because the bank had a problem (ldo that's why it failed) so the FDIC and regulators don't really want a single other bank to just inherit all the problems. They would prefer them to be spread about a bit so there isn't just one bank under massive stress. [2] Yes yet another bank failure caused by mortgage backed securities although in this case it seems from the public information that it was actually the hedging strategy that caused SBV to go down, not the MBS. The reason MBS means it doesn't matter that much is all the information about individual MBS is public anyway and although you don't know who holds what on a line by line basis you know generally how much each bank on the street has and you know someone is holding all the pieces of a given bond.
    - hd95489 4y ago
      How much of a haircut do the assets take during the process. I’m assuming nobody is paying market rate so how much under is the bid? Like 80% or like 30-40%
      - twoodfin 4y ago
        Given the constraints, the result of this auction is likely to be the closest measurement of “market rate” we’re going to get.
        hd95489 4y ago
        Only a few chosen players get to bid so it’s going to come with some haircut off market
      - seanhunter 4y ago
- _boffin_ 4y ago
  Would love to hear more if you’re willing to Take the time and write it out.
- bob_theslob646 4y ago
  The way to determine a mark is extremely different than in 08' , be mindful of that. Determining that mark is an incredibly difficult task.
- Symmetry 4y ago
  Like the Excel Spreadsheet that FTX was shopping around but accurate and with no "“Hidden, poorly internally labeled ‘fiat@’ account" entry. SVB may have screwed up badly but I don't think anyone is accusing them of bad record keeping or any other impropriety.
  - ambicapter 4y ago
    I suspect the FDIC made that spreadsheet on Friday/Saturday after taking over the bank and its quality is way higher than Bankman's.
    - seanhunter 4y ago
      Yes. No suggestion of fraud here so there's no reason it shouldn't be just a dump out from the systems of record.
- MuffinFlavored 4y ago
  > Then you typically have until late sunday to put the bid in so they can resolve the bank before market opens on Monday. nobody is going to pay 100% for them, right? so it's basically who will pay the most between 50-95% for them? why wouldn't somebody want assets 5% off (full 95% bid?)
  - adastra22 4y ago
    If you're a competing bank in that sector (like First Republic, for example), why wouldn't you pay full price for the good will and customer list? Even if you end up having to (potentially) pay 5% of the assets over time, that's a small price to pay to take over the entire market of startup customers overnight.

For banks that are bidding, how do they know how many assets SVB had? Are they working off of data from past fillings?

by sigmar 4y ago

For banks that are bidding, how do they know how many assets SVB had? Are they working off of data from past fillings?

WJW 4y ago

SVB itself knows which assets it has, and therefore the FDIC knows. They then send out invitations to bid to banks with the list of assets as an attachment. EDIT: It's not only the assets that are being bid on, the curator could just sell those themselves. But SVB has (even now) some amount of intangible value in terms of relations with customers, built up expertise in serving startups, etc etc. A bank looking to diversify into providing banking services for startups might be willing to bid more for such expertise and customer lists than a bank which is happy with the customer base it has. So I'd expect it would be mostly the intangibles which drive the potential differences in bids, with the market price of the assets merely serving as floor.

seanhunter 4y ago

You get an excel sheet with all the assets and their current mark. Then you typically have until late sunday to put the bid in so they can resolve the bank before market opens on Monday. Source: was part of a team doing this valuation analysis over a very fun weekend in 2008 for one of the famous bank failures

MonkeyMalarky 4y ago
Are bidders expected to forget or "un-see" such knowledge afterwards? Or is the information not that detailed / anonymized in some way?
- drexlspivey 4y ago
  Why would they need to un-see it?
  - bunabhucan 4y ago
    Competitive advantage. If bigTechA and bigTechB discuss merging there will come a point in the due diligence where certain employees are asked to review competitive secret sauce of the other company with the understanding that if the merger unravels for some reason they will have to take a package and stop working for their current employer. I can't imagine the mbs/loan portfolio is that proprietary though.
    - qbasic_forever 4y ago
      SVB is dead. The company has failed. There is no competitive advantage because SVB is not in competition anymore, it is dead. The former SVB employees are sticking on for 45 days (at 1.5x pay) to tie up loose ends according to the FDIC. But SVB is dead, the assets are being sold and might as well be public record at this point.
      - nwatson 4y ago
        Isn't there goodwill value left over because of relationships and institutional knowledge, even after SVB is stripped of assets and after debt is accounted for? Might some larger bank retain that operation and return some value to taxpayers?
        700000thMistake 4y ago
        [dead]
        youngtaff 4y ago
        Goodwill is the difference in value between the assets of a company and the price an acquirer paid for a that company
        drexlspivey 4y ago
        Their liabilities are greater than their assets, there is no equity value left. Someone can acquire them for $1 if they want to assume their liabilities.
- seanhunter 4y ago
  The data is full detail. You know if you don't put the winning bid in that one of your competitors are holding those assets, and in certain cases even know who is holding it [1]. In this case it doesn't really matter that much because most of the assets that caused the problem are not the loans but the MBS that SBV bought because it had massively increased deposits and couldn't find enough eligable borrowers to lend out to.[2] [1] For various reasons it's not just "the winning bidder holds all the stuff". There's a lot of horse trading where people buy chunks of it and the winning bidder gets the rest. This is important from a TBTF point of view because the bank had a problem (ldo that's why it failed) so the FDIC and regulators don't really want a single other bank to just inherit all the problems. They would prefer them to be spread about a bit so there isn't just one bank under massive stress. [2] Yes yet another bank failure caused by mortgage backed securities although in this case it seems from the public information that it was actually the hedging strategy that caused SBV to go down, not the MBS. The reason MBS means it doesn't matter that much is all the information about individual MBS is public anyway and although you don't know who holds what on a line by line basis you know generally how much each bank on the street has and you know someone is holding all the pieces of a given bond.
  - hd95489 4y ago
    How much of a haircut do the assets take during the process. I’m assuming nobody is paying market rate so how much under is the bid? Like 80% or like 30-40%
    - twoodfin 4y ago
      Given the constraints, the result of this auction is likely to be the closest measurement of “market rate” we’re going to get.
      - hd95489 4y ago
        Only a few chosen players get to bid so it’s going to come with some haircut off market
    - seanhunter 4y ago
_boffin_ 4y ago
Would love to hear more if you’re willing to Take the time and write it out.
bob_theslob646 4y ago
The way to determine a mark is extremely different than in 08' , be mindful of that. Determining that mark is an incredibly difficult task.
Symmetry 4y ago
Like the Excel Spreadsheet that FTX was shopping around but accurate and with no "“Hidden, poorly internally labeled ‘fiat@’ account" entry. SVB may have screwed up badly but I don't think anyone is accusing them of bad record keeping or any other impropriety.
- ambicapter 4y ago
  I suspect the FDIC made that spreadsheet on Friday/Saturday after taking over the bank and its quality is way higher than Bankman's.
  - seanhunter 4y ago
    Yes. No suggestion of fraud here so there's no reason it shouldn't be just a dump out from the systems of record.
MuffinFlavored 4y ago
> Then you typically have until late sunday to put the bid in so they can resolve the bank before market opens on Monday. nobody is going to pay 100% for them, right? so it's basically who will pay the most between 50-95% for them? why wouldn't somebody want assets 5% off (full 95% bid?)
- adastra22 4y ago
  If you're a competing bank in that sector (like First Republic, for example), why wouldn't you pay full price for the good will and customer list? Even if you end up having to (potentially) pay 5% of the assets over time, that's a small price to pay to take over the entire market of startup customers overnight.