4 ms·

Mark Cuban Had Millions at Silicon Valley Bank

27 points by CPLX 4y ago

CPLX 4y ago
Also Mark Cuban: “The tragedy of SVB is that its not the wealthy taking the hit. It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect” https://twitter.com/mcuban/status/1634427092824629251?s=20 https://twitter.com/mcuban/status/1634427092824629251?s=20
- credit_guy 4y ago
  I'm not sure those "thousands of companies" described will take a loss. The situation Mark Cuban talks about works like this: most small/medium companies finance themselves with a bank loan (and equity). The bank loan is reviewed periodically (e.g. annually), and renewed appropriately. The loan is used to pay employees, suppliers, and for other expenses. The amount of the loan, is held at the same bank. It doesn't need to be strictly speaking, but a bank does not like to advance you a loan, so you can take it, cash it and deposit it at a different bank. Ok, so now a company has a loan (asset for the bank, liability for the company) and a deposit (liability for the bank, asset for the company). The amounts don't match perfectly, due to ongoing payments and receipts. Now, there's something called "netting agreement". The Fed has a short intro on that [1]. I don't know if every single company has one set up, but going forward they should think hard if they decide to not set it up. If you have such a netting agreement and the bank fails to pay you on the deposit, then the amount you owe them on the loan decreases dollar for dollar. Of course, it's still inconvenient for you in terms of day to day operations, but in the end you should not lose money. You should not have any issues to start banking with a different bank, if you can show them the netting agreement. [1] https://www.newyorkfed.org/medialibrary/microsites/fmlg/files/Millerspresentationonnetting.pdf https://www.newyorkfed.org/medialibrary/microsites/fmlg/file...
  - tomcam 4y ago
    Great explanation. Username definitely checks out.
zahma 4y ago
Why is this even newsworthy?
- calr 4y ago
  Agree, this does not matter to Mark Cuban and certainly not us. Mark is gonna be fine even in the absolute worst case where the money is locked up for years, and he takes a 20% haircut on his modest deposit. This crisis is for businesses that need access to their money now to pay wages and bills.
- partiallypro 4y ago
  He had been all over Twitter begging for a bailout of SVB.
- CPLX 4y ago
  Because he’s been forcefully arguing for a bailout and not saying a word about it, instead talking about the common people.
- yucky 4y ago
  It's important for everyone to know that our tax dollars will be used and/or the value of our meager assets will be inflated away in order to soften the loss for people like Mark Cuban. I'll sleep better tonight.
bmitc 4y ago
That is around 0.2% of his estimated net worth. I'm not sure he can recover from this.
- incahoots 4y ago
  So more Shark Tank episodes? lol
- hinkley 4y ago
  He might have to get the normal sized swimming pool instead of the olympic one.
ChancyChance 4y ago
If I run a company that has a payroll of millions, where do I keep that cash until I can issue all the checks? It's not like I'm going to sell a bunch of bonds every two weeks to meet payroll. I'll never have to worry about this, but with the tiny bit I've learned in the few days... now I'm curious to understand how large amounts of cash are kept on hand for situations like this.
- yial 4y ago
  Off the top of my head: MaxSafe - https://www.wintrust.com/business-solutions/mid-market/banking/maxsafe.html https://www.wintrust.com/business-solutions/mid-market/banki... A cash management account - https://www.forbes.com/advisor/banking/what-is-a-cash-management-account/ https://www.forbes.com/advisor/banking/what-is-a-cash-manage... Or Many banks participate in IntraFi https://www.intrafinetworkdeposits.com/how-it-works/ https://www.intrafinetworkdeposits.com/how-it-works/

27 points by CPLX 4y ago

CPLX 4y ago

Also Mark Cuban: “The tragedy of SVB is that its not the wealthy taking the hit. It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect” https://twitter.com/mcuban/status/1634427092824629251?s=20 https://twitter.com/mcuban/status/1634427092824629251?s=20

credit_guy 4y ago
I'm not sure those "thousands of companies" described will take a loss. The situation Mark Cuban talks about works like this: most small/medium companies finance themselves with a bank loan (and equity). The bank loan is reviewed periodically (e.g. annually), and renewed appropriately. The loan is used to pay employees, suppliers, and for other expenses. The amount of the loan, is held at the same bank. It doesn't need to be strictly speaking, but a bank does not like to advance you a loan, so you can take it, cash it and deposit it at a different bank. Ok, so now a company has a loan (asset for the bank, liability for the company) and a deposit (liability for the bank, asset for the company). The amounts don't match perfectly, due to ongoing payments and receipts. Now, there's something called "netting agreement". The Fed has a short intro on that [1]. I don't know if every single company has one set up, but going forward they should think hard if they decide to not set it up. If you have such a netting agreement and the bank fails to pay you on the deposit, then the amount you owe them on the loan decreases dollar for dollar. Of course, it's still inconvenient for you in terms of day to day operations, but in the end you should not lose money. You should not have any issues to start banking with a different bank, if you can show them the netting agreement. [1] https://www.newyorkfed.org/medialibrary/microsites/fmlg/files/Millerspresentationonnetting.pdf https://www.newyorkfed.org/medialibrary/microsites/fmlg/file...
- tomcam 4y ago
  Great explanation. Username definitely checks out.

zahma 4y ago

Why is this even newsworthy?

calr 4y ago
Agree, this does not matter to Mark Cuban and certainly not us. Mark is gonna be fine even in the absolute worst case where the money is locked up for years, and he takes a 20% haircut on his modest deposit. This crisis is for businesses that need access to their money now to pay wages and bills.
partiallypro 4y ago
He had been all over Twitter begging for a bailout of SVB.
CPLX 4y ago
Because he’s been forcefully arguing for a bailout and not saying a word about it, instead talking about the common people.
yucky 4y ago
It's important for everyone to know that our tax dollars will be used and/or the value of our meager assets will be inflated away in order to soften the loss for people like Mark Cuban. I'll sleep better tonight.

bmitc 4y ago

That is around 0.2% of his estimated net worth. I'm not sure he can recover from this.

incahoots 4y ago
So more Shark Tank episodes? lol
hinkley 4y ago
He might have to get the normal sized swimming pool instead of the olympic one.

ChancyChance 4y ago

If I run a company that has a payroll of millions, where do I keep that cash until I can issue all the checks? It's not like I'm going to sell a bunch of bonds every two weeks to meet payroll. I'll never have to worry about this, but with the tiny bit I've learned in the few days... now I'm curious to understand how large amounts of cash are kept on hand for situations like this.

yial 4y ago
Off the top of my head: MaxSafe - https://www.wintrust.com/business-solutions/mid-market/banking/maxsafe.html https://www.wintrust.com/business-solutions/mid-market/banki... A cash management account - https://www.forbes.com/advisor/banking/what-is-a-cash-management-account/ https://www.forbes.com/advisor/banking/what-is-a-cash-manage... Or Many banks participate in IntraFi https://www.intrafinetworkdeposits.com/how-it-works/ https://www.intrafinetworkdeposits.com/how-it-works/