Executives at SVB Financial, the parent company of the embattled Silicon Valley Bank, are in talks to sell the company, CNBC reported Friday, citing unnamed sources. SVB Financial’s stock tanked roughly 60% on Thursday after it announced a plan to raise more than $2 billion in capital to cover losses at its start-up-focused Silicon Valley Bank. From that level, after the stock took a haircut from around $268 to $106 per share, it looked poised to fall yet another 65% in pre- market trading on Friday morning, before trading was halted as reports swirled of a run on the bank.
“It doesn’t smell good right now and there’s a lot of panic,” one venture investor who spoke with dozens of SVB clients and requested to remain anonymous, told Fortune Thursday.
The unnamed sources told CNBC that SVB Financial’s attempts to raise funds to strengthen its balance sheet have been unsuccessful and the bank had hired advisors to explore a potential sale. However, the sources added that a massive run on the bank is happening, and deposit outflows are challenging potential buyers’ efforts to realistically assess the bank’s status.
The Information also reported Friday that bankers are actively assessing SVB as an acquisition target, but big banks are unlikely to step forward as buyers with customers continuing to flee the bank.
Silicon Valley Bank is known for lending to higher-risk tech and crypto startups, with over half of its relationships involving venture-backed U.S. companies. But with interest rates rising and inflation proving to be stubborn, along with some spectacular blowups for venture capital in the bear market and crypto winter of 2022, the sector is suffering. Deposits at the bank have dropped dramatically just as rising rates have hurt the value of SVB’s bonds and loans, and a sudden influx of withdrawals on Thursday prompted SVB’s CEO Greg Becker to hold a Zoom call with venture firms that afternoon, The Information reported. “We have been supporting you and your startups for 30 years. We now ask you not to panic,” he said. They ran for the exits instead..
Silicon Valley venture capitalists are worried about the fallout from the bank’s issues, arguing that it is critical to the fabric of the start-up industry.
Becker, seeking to assuage fears about “a run” on his bank, also sent emails seen by Fortune saying that “SVB is well-capitalized” and “has a high-quality, liquid balance sheet.” But the credit rating agencies Moody’s and S&P Global both downgraded SVB Financial’s debt to just one notch above a junk rating after the news of its capital raise broke, citing a “weaker funding profile.”
Silicon Valley Bank’s issues also caused a widespread sell-off in financial services stocks Thursday as investors feared contagion, with the four largest U.S. banks losing $52 billion in market cap in a single day. And the billionaire investor Bill Ackman warned Thursday that the failure of Silicon Valley Bank could “destroy” the VC space, which is a “long-term driver of the economy.” He argued that the bank is “too big to fail” and the government should step in to save the day if necessary, raising the specter of the 2008-era contagion in the financial services space that sparked the Great Financial Crisis.
“If private capital can’t find a solution, a highly dilutive government bailout should be considered,” Ackman tweeted.
SVB did not immediately respond to Fortune‘s request for comment.
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