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These shares are not worthless at all if the bank has a future. SVB's main issue is that you have to wait for the treasuries to get back to the par value once t
by rvnx 4y ago
These shares are not worthless at all if the bank has a future. SVB's main issue is that you have to wait for the treasuries to get back to the par value once they mature.
If SVB distributes shares of itself in prorata of the liabilities that they have toward their customers, then customers would essentially have majority of voting rights, and they can decide on what to do.
They can vote a resolution to get physical delivery of the underlying bonds, and individually decide to wait it out and/or sell portions of bonds on the market progressively (when they need cash).
- ejb999 4y agoequity holders will almost certainly be wiped out, so I believe the share are now worthless. (the cramer curse.)
- paxys 4y agoThe bank's shares were at $270 on Wednesday, $106 on Thursday and $34 on Friday before trading was finally halted and feds took over. So under standard definitions of "worth", there is approximately zero in this company. It does not have a future.
- littlestymaar 4y agoGiven that their liabilities excess their assets by a few billions, there's even less than zero in there.
- paxys 4y agoWell good thing shareholders aren't on the hook for those, and the floor value of the shares is zero. Imagine a world where that wasn't the case though.
- rvnx 4y agoIt's called Switzerland, where shareholders of Private Banks used to have unlimited liability (now it has changed).
- jakeinspace 4y agoWell, that world would be closer to a true free market. The legal protection of limited liability makes modern stock markets work, but it is absolutely a massive benefit given from the working+middle class towards investors (of course there is an overlap between those groups). It’s my first argument any time I hear someone complain about capital gains tax being double taxation on top of corporate taxes.
- dragontamer 4y agoSVB's main issue is that their depositors are leaving, and they have to pay their depositors _RIGHT NOW_, as this ongoing bank run occurs. They cannot afford to wait. Depositors have higher priority than shareholders, so any shareholder equity is obviously wiped out and $0. Such is the curse of seniority: the depositors have a stronger legal priority on those bonds than the shareholders, so the depositors get paid first... and the share holders are paid whatever is remaining (probably $0)
- Denvercoder9 4y ago> and individually decide to wait it out and/or sell portions of bonds on the market progressively You don't need SVB to be an ongoing concern to do this. If SVB is liquidated and its depositors are paid from that sale, they can just buy back those same bonds on the open market for the same price if they want to wait them out.
- rvnx 4y agoOne issue with this approach with SVB liquidating everything is that suddenly a lot of bonds are going to be sold, and this creates a big risk to have depressed assets prices, and prices of the bonds spiraling down further if there are no buyer on the other side. This is what happened during the Kerviel scandal in France, when Societe Generale tried to unwind the risky positions of a trader. Unless the government steps in and decides to purchase these bonds that SVB is selling and add them on its balance sheet... Which essentially would put the burden on the random non-Silicon Valley guys who didn't ask for anything (and it's not fair). The other thing, is that many companies don't need 100% of their cash. They may just use SVB as storage, and waiting for the bonds to mature may be totally fine rather than take a loss. Also, during this interval that they have to wait. If capital is needed, VCs may have better capabilities to raise capital at good conditions, rather than a failed bank.
- deleted 4y ago[deleted]
- cragfar 4y agoFDIC took over the bank on Friday. There's no going back from that, the company is over and shareholders are wiped out.