4 ms·

HSBC Purchased Silicon Valley Bank UK (SVB UK) for $1.21 (£1)

103 points by voytec 4y ago

amriksohata 4y ago
Related, Hindenburg got trolled in India for not spotting this earlier on. https://www.indiatimes.com/worth/news/hindenburg-trolled-for-failing-to-detect-svb-crisis-in-home-country-595726.html https://www.indiatimes.com/worth/news/hindenburg-trolled-for...
carterschonwald 4y ago
Is this a typo?
- wyldfire 4y ago
  Likely not. They get to assume all of their (SVB uk) liabilities. However, specifically excluded are SVB's assets/liabilities: > The assets and liabilities of the parent companies of SVB UK are excluded from the transaction.
- jimnotgym 4y ago
  It is a legal term. A contract has to have 'consideration' (an exchange of value) to be legally binding in the UK. HSBC are taking this bank for free, but since you can't do that they say £1. An even funnier term comes out of free property leases. Due to some historical convention the consideration is sometimes still written as 'one peppercorn if demanded'!
  - _yb2s 4y ago
    Exercising peppercorn options is a taxable event.
  - tsujamin 4y ago
    when my colleagues and I bought the IP off of the company we were dissolving, one of them bought a 1kg container of peppercorns for each of us to draw our consideration from. The peppercorns are still taped to the folder of company documents in my filing cabinet
  - zabzonk 4y ago
    yep, i am trying to extend the lease on a flat i own in london, and the contract my solicitor drew up cited the ground rent as one peppercorn. actual ground rent i am currently paying is 100 gbp p/a.
  - petepete 4y ago
    The lease for a piece of demised land which is now part of my garden says: > as aforesaid for a term of Nine hundred and ninety nine years from the date hereof subject nevertheless to the proviso for re-entry hereinafter contained YIELDING AND PAYING THEREFOR [sic] during the said term a yearly rent of one peppercorn (if demanded) to be paid on the First day of January every year Possibly the most impenetrable sentence I've ever read, and I had to look up the whole peppercorn thing. Nobody's ever requested anything so am yet to post any peppercorns.
- otherme123 4y ago
  http://news.bbc.co.uk/2/hi/business/741701.stm http://news.bbc.co.uk/2/hi/business/741701.stm Not the first time it happens.
niklasrde 4y ago
Duplicate of https://news.ycombinator.com/item?id=35132181 https://news.ycombinator.com/item?id=35132181
georgyo 4y ago
I'd buy that for a dollar! In all seriousness, they are also buying the all the liabilities and illiquid assets. So current value wise, this seems about right. However long term, a lot of these customers will stick with HSBC and may generate a lot of future value.
- celticninja 4y ago
  Buying financial institutions is always £1 or $1, I remember barings bank being sold for £1
  - vidarh 4y ago
    No, it's not not always, or even usually, that. This reflects that it's a failing business (like Barings) where the real cost to the purchaser is taking on the risks and liabilities and injecting whatever capital and effort needed to extract value from the remaining assets. Many sales of solvent banks happens regularly too.
    - celticninja 4y ago
      I meant distressed financial institutions, I should have been more clear.
  - helsinkiandrew 4y ago
    To be a legal contract in England (and probably anywhere whose laws are based on English commmon law) there has to be an exchange or consideration of a nominal amount between parties. It’s the same concept as why peppercorn rents are paid https://en.m.wikipedia.org/wiki/Consideration#Nominal_consideration https://en.m.wikipedia.org/wiki/Consideration#Nominal_consid... There’s a collection of once mighty companies you could buy for the price of a burger: https://www.bbc.co.uk/news/business-44250900.amp https://www.bbc.co.uk/news/business-44250900.amp
- bell-cot 4y ago
  > ...this seems about right. With huge uncertainties in the assets & liabilities, no time to narrow those down before deciding, executives often too optimistic about such situations, and the regulators obviously "shopping" potential buyers for the least-rational optimists ...my bet would be that it's worth far less.
MagicMoonlight 4y ago
So they bought it for £1… and it has more assets than liabilities. Are these people dumb or something? Why would you sell that?
- jimnotgym 4y ago
  They have no choice, they are insolvent
  - ldoughty 4y ago
    The UK branch was not at risk, and was in much better shape. Even if they had to close because their parents company was insolvent, you'd expect whomever is responsible for selling assets would want to get a better deal to get money back for shareholders.
    - raesene9 4y ago
      I'm not sure we know that SVB UK was actually in better shape. They made representations to that effect last week, but the fact the banking authorities moved in so quickly implies that all was not well. Of course if they have sold the assets for well under real value, you'd expect some level of legal challenge from the shareholders who are losing out under this deal.
    - KptMarchewa 4y ago
      It was at risk of a similar bank run, regardless of actual balance sheet.
      - capableweb 4y ago
        Is being at risk enough for the Bank of England to come in and shut you down? I have a feeling it has to be more than just "at risk" for something that drastic to happen.
    - celticninja 4y ago
      But they could be called upon to sell their assets at a loss to prop up the parent bank.
logicchains 4y ago
At this point HSBC is basically an arm of the CCP, so it's interesting to consider what they might expect to gain from this.
- e2le 4y ago
  It's my understanding that HSBC is a British bank, has this changed?
  - fredoralive 4y ago
    It's complex. It started as the Hongkong and Shanghai Banking Corporation, and was historically based in Hong Kong. During the 1990s it moved its headquarters to London ahead of Hong Kong being returned to China, and amongst other international expansions and acquisitions bought the Midland Bank, which is now the HSBC UK high street bank[1]. It still has a large presence in the far east (and indeed its current strategy is a "pivot" to the east), it's the complexities around its interactions with China that the original post refer to. I suspect the main "political" point of the acquisition, if any, is UK domestic factor that its just done the UK government a big favour by solving the SVB UK issues without the government having to spend any money. No doubt they can remind the government of that fact in the future. [1] SVB UK has specifically been acquired by HSBC UK Bank plc, the ringfenced subsidiary that owns the UK "high street" operation.
- tehjoker 4y ago
  The official name is the Communist Party of China (CPC)
  - ceejayoz 4y ago
    CCP is more commonly used in English; https://en.wikipedia.org/wiki/Chinese_Communist_Party https://en.wikipedia.org/wiki/Chinese_Communist_Party.
    - tehjoker 4y ago
      that's kinda my point
xwdv 4y ago
That’s $1.21 dollars. With a ‘D’.
willvarfar 4y ago
Even though HSBC is taking on SVBUK's debt, it still has to pay £1. This is necessary to make the contract legal. See https://help.seedlegals.com/en/2338976-why-do-i-need-to-pay-1-consideration https://help.seedlegals.com/en/2338976-why-do-i-need-to-pay-... This links to https://en.wikipedia.org/wiki/Peppercorn_(law) https://en.wikipedia.org/wiki/Peppercorn_(law) When I was a kid I heard that some local farmers paid a peppercorn rent to the our local church to be able to farm some fields. At the time I really thought they were literally paying in pepper corns.
- denotational 4y ago
  > they were literally paying in pepper corns The lease for my old flat in London stipulated ground rent in the amount of one peppercorn per annum, so it’s not impossible!
- helsinkiandrew 4y ago
  Many old contracts still pay in actual peppercorns. https://www.bathchronicle.co.uk/news/bath-news/university-bath-paying-peppercorn-rent-1166973.amp https://www.bathchronicle.co.uk/news/bath-news/university-ba...
  - woleium 4y ago
    it's because rent used to be paid as a portion of salary, which was an annual salt allowance before it referred to money. Pepper was "the other table spice" and was much cheaper, so was used in it's place to make documents legal.
deleted 4y ago
[deleted]
dahfizz 4y ago
> The acquisition will be funded from existing resources. I find this hilarious. This is probably all from some template, but talking about "funding" a 1 euro transaction is funny.

103 points by voytec 4y ago

Related, Hindenburg got trolled in India for not spotting this earlier on. https://www.indiatimes.com/worth/news/hindenburg-trolled-for-failing-to-detect-svb-crisis-in-home-country-595726.html https://www.indiatimes.com/worth/news/hindenburg-trolled-for...

carterschonwald 4y ago

Is this a typo?

wyldfire 4y ago
Likely not. They get to assume all of their (SVB uk) liabilities. However, specifically excluded are SVB's assets/liabilities: > The assets and liabilities of the parent companies of SVB UK are excluded from the transaction.
jimnotgym 4y ago
It is a legal term. A contract has to have 'consideration' (an exchange of value) to be legally binding in the UK. HSBC are taking this bank for free, but since you can't do that they say £1. An even funnier term comes out of free property leases. Due to some historical convention the consideration is sometimes still written as 'one peppercorn if demanded'!
- _yb2s 4y ago
  Exercising peppercorn options is a taxable event.
- tsujamin 4y ago
  when my colleagues and I bought the IP off of the company we were dissolving, one of them bought a 1kg container of peppercorns for each of us to draw our consideration from. The peppercorns are still taped to the folder of company documents in my filing cabinet
- zabzonk 4y ago
  yep, i am trying to extend the lease on a flat i own in london, and the contract my solicitor drew up cited the ground rent as one peppercorn. actual ground rent i am currently paying is 100 gbp p/a.
- petepete 4y ago
  The lease for a piece of demised land which is now part of my garden says: > as aforesaid for a term of Nine hundred and ninety nine years from the date hereof subject nevertheless to the proviso for re-entry hereinafter contained YIELDING AND PAYING THEREFOR [sic] during the said term a yearly rent of one peppercorn (if demanded) to be paid on the First day of January every year Possibly the most impenetrable sentence I've ever read, and I had to look up the whole peppercorn thing. Nobody's ever requested anything so am yet to post any peppercorns.
otherme123 4y ago
http://news.bbc.co.uk/2/hi/business/741701.stm http://news.bbc.co.uk/2/hi/business/741701.stm Not the first time it happens.

niklasrde 4y ago

Duplicate of https://news.ycombinator.com/item?id=35132181 https://news.ycombinator.com/item?id=35132181

georgyo 4y ago

I'd buy that for a dollar! In all seriousness, they are also buying the all the liabilities and illiquid assets. So current value wise, this seems about right. However long term, a lot of these customers will stick with HSBC and may generate a lot of future value.

celticninja 4y ago
Buying financial institutions is always £1 or $1, I remember barings bank being sold for £1
- vidarh 4y ago
  No, it's not not always, or even usually, that. This reflects that it's a failing business (like Barings) where the real cost to the purchaser is taking on the risks and liabilities and injecting whatever capital and effort needed to extract value from the remaining assets. Many sales of solvent banks happens regularly too.
  - celticninja 4y ago
    I meant distressed financial institutions, I should have been more clear.
- helsinkiandrew 4y ago
  To be a legal contract in England (and probably anywhere whose laws are based on English commmon law) there has to be an exchange or consideration of a nominal amount between parties. It’s the same concept as why peppercorn rents are paid https://en.m.wikipedia.org/wiki/Consideration#Nominal_consideration https://en.m.wikipedia.org/wiki/Consideration#Nominal_consid... There’s a collection of once mighty companies you could buy for the price of a burger: https://www.bbc.co.uk/news/business-44250900.amp https://www.bbc.co.uk/news/business-44250900.amp
bell-cot 4y ago
> ...this seems about right. With huge uncertainties in the assets & liabilities, no time to narrow those down before deciding, executives often too optimistic about such situations, and the regulators obviously "shopping" potential buyers for the least-rational optimists ...my bet would be that it's worth far less.

MagicMoonlight 4y ago

So they bought it for £1… and it has more assets than liabilities. Are these people dumb or something? Why would you sell that?

jimnotgym 4y ago
They have no choice, they are insolvent
- ldoughty 4y ago
  The UK branch was not at risk, and was in much better shape. Even if they had to close because their parents company was insolvent, you'd expect whomever is responsible for selling assets would want to get a better deal to get money back for shareholders.
  - raesene9 4y ago
    I'm not sure we know that SVB UK was actually in better shape. They made representations to that effect last week, but the fact the banking authorities moved in so quickly implies that all was not well. Of course if they have sold the assets for well under real value, you'd expect some level of legal challenge from the shareholders who are losing out under this deal.
  - KptMarchewa 4y ago
    It was at risk of a similar bank run, regardless of actual balance sheet.
    - capableweb 4y ago
      Is being at risk enough for the Bank of England to come in and shut you down? I have a feeling it has to be more than just "at risk" for something that drastic to happen.
  - celticninja 4y ago
    But they could be called upon to sell their assets at a loss to prop up the parent bank.

logicchains 4y ago

At this point HSBC is basically an arm of the CCP, so it's interesting to consider what they might expect to gain from this.

e2le 4y ago
It's my understanding that HSBC is a British bank, has this changed?
- fredoralive 4y ago
  It's complex. It started as the Hongkong and Shanghai Banking Corporation, and was historically based in Hong Kong. During the 1990s it moved its headquarters to London ahead of Hong Kong being returned to China, and amongst other international expansions and acquisitions bought the Midland Bank, which is now the HSBC UK high street bank[1]. It still has a large presence in the far east (and indeed its current strategy is a "pivot" to the east), it's the complexities around its interactions with China that the original post refer to. I suspect the main "political" point of the acquisition, if any, is UK domestic factor that its just done the UK government a big favour by solving the SVB UK issues without the government having to spend any money. No doubt they can remind the government of that fact in the future. [1] SVB UK has specifically been acquired by HSBC UK Bank plc, the ringfenced subsidiary that owns the UK "high street" operation.
tehjoker 4y ago
The official name is the Communist Party of China (CPC)
- ceejayoz 4y ago
  CCP is more commonly used in English; https://en.wikipedia.org/wiki/Chinese_Communist_Party https://en.wikipedia.org/wiki/Chinese_Communist_Party.
  - tehjoker 4y ago
    that's kinda my point

xwdv 4y ago

That’s $1.21 dollars. With a ‘D’.

willvarfar 4y ago

Even though HSBC is taking on SVBUK's debt, it still has to pay £1. This is necessary to make the contract legal. See https://help.seedlegals.com/en/2338976-why-do-i-need-to-pay-1-consideration https://help.seedlegals.com/en/2338976-why-do-i-need-to-pay-... This links to https://en.wikipedia.org/wiki/Peppercorn_(law) https://en.wikipedia.org/wiki/Peppercorn_(law) When I was a kid I heard that some local farmers paid a peppercorn rent to the our local church to be able to farm some fields. At the time I really thought they were literally paying in pepper corns.

denotational 4y ago
> they were literally paying in pepper corns The lease for my old flat in London stipulated ground rent in the amount of one peppercorn per annum, so it’s not impossible!
helsinkiandrew 4y ago
Many old contracts still pay in actual peppercorns. https://www.bathchronicle.co.uk/news/bath-news/university-bath-paying-peppercorn-rent-1166973.amp https://www.bathchronicle.co.uk/news/bath-news/university-ba...
- woleium 4y ago
  it's because rent used to be paid as a portion of salary, which was an annual salt allowance before it referred to money. Pepper was "the other table spice" and was much cheaper, so was used in it's place to make documents legal.

deleted 4y ago

[deleted]

dahfizz 4y ago

> The acquisition will be funded from existing resources. I find this hilarious. This is probably all from some template, but talking about "funding" a 1 euro transaction is funny.