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Silicon Valley Bank, Serving VCs like a16z, in Crisis as Shares Drop 41% Premarket

Tim Fries

Published: March 10, 2023 7:10 am

Last Updated: March 10, 2023 12:12 pm

Silicon Valley Bank (SVB), one of the key banks serving early-stage businesses and venture capital (VC) giants like Sequoia Capital and Andreessen Horowitz (a16z), saw its shares drop an additional 38% in premarket trading Friday. The stock fell by a whopping 60% on Thursday, just one day after Silvergate Bank shut down.

Silicon Valley Bank Stock Price Down at Double Digits

Shares of Silicon Valley Bank are down significantly in premarket trading Friday as the bank’s stock continued taking a beating after a major sell-off on Thursday. The stock plummeted 60% on Thursday to close at $106.04, falling a further 38% in market pre-open to below $64 per share.

The stock wipeout came after SVB launched a $1.75 billion share sale on Wednesday to cover the $1.8 billion hole created by the firesale of its unprofitable $21 billion bond portfolio, mostly made up of US Treasuries. SVB investors were skeptical about whether the share sale would be successful enough to help the bank prop up its damaged balance sheet, considering that most of the tech startups the bank serves are currently struggling. The lack of optimism resulted in the biggest stock collapse since 2016.

Apart from serving many tech and healthcare startups in the US, SVB is also one of the key partners of venture capital (VC) firms such as a16z and Sequoia Capital. A16z and Sequoia are some of the most renowned VC investors in crypto businesses such as Talos, Aptos, Yuga Labs, Anchorage Digital, and the collapsed FTX.

A Run on the Silicon Valley Bank?

Some investors believe the SVB stock rout was not merely due to the VC-focused bank’s fragile balance sheet and the subsequent share sale. Just a day before the SVB stock collapsed, Silvergate Capital Corporation announced it was winding down operations and voluntarily liquidating Silvergate Bank.

Silvergate, formerly known as one of the pillars of the crypto-banking ecosystem, gave in after being under severe pressure since the FTX fiasco in November 2022. The crypto bank recently delayed its 10-K filing for 2022, forcing investors to jump ship and causing a considerable drop in its share price.

Now, SVB faces similar risks as its stock continues to fall rapidly. Its investors are concerned about a potential bank run or that SVB could have insufficient cash to continue operating, forcing regulators to sell the bank to a bigger rival or wind it down. Billionaire investor Bill Ackman has suggested that government intervention shouldn’t be out of the question if the bank continues to collapse.

This article originally appeared on The Tokenist