SVB Financial falls more than 50% as the tech bank tries to raise more money

Trading in the stock was halted several times during the session due to volatility.
The company said in a letter from CEO Greg Becker on Wednesday that it had sold “substantially all” of its available-for-sale securities.
The sale of securities will result in an after-tax loss of $1.8 billion, the SVB letter said.

This photo shows SVB Financial Group’s TradingView stock market chart on a smartphone with the SVB Financial Group logo in the background.

Igor Golovnev | Light Rocket | Getty Images

Shares in tech-focused bank SVB Financial fell more than 50% on Thursday after the company announced a plan to raise more than $2 billion of capital to offset losses on bond sales.

Trading in the stock was suspended several times during the trading session due to volatility, and the drop brought SVB’s market cap below $8 billion.

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SVB Financial fell sharply after the bank announced a plan to raise more cash.

The company said Wednesday in a letter from CEO Greg Becker that it had sold “substantially all” of its securities it had for sale and was looking to raise $2.25 billion between common stock and convertible preferred stock.

The investment fund General Atlantic has already committed to contributing $500 million of that sum, the letter said.

The sale of securities will result in an after-tax loss of profit of $1.8 billion, SVB’s letter said, but the company added that its plan to reinvest the proceeds should be “immediately profitable,” as the bank restructures its balance sheet.

The company previously reported $28.8 billion in available-for-sale securities on its balance sheet at the end of December and $95.3 billion in held-to-maturity securities. Most of the securities available for sale were US government bonds.

The Federal Reserve has been aggressively raising interest rates over the past year, which can cause bond values ​​to fall — particularly bonds with many years to maturity. SVB said it reinvests the proceeds from its sales into shorter-term assets.

The bank cited higher interest rates and “increased cash burn from our customers” as reasons for raising the new capital. The company is heavily involved in startups and says on its website that almost half of all venture capital-backed technology and life science companies in the US bank are with SVB.

Wells Fargo Bank analyst Mike Mayo said in a note to clients that SIVB’s problems appeared to be due to “a lack of funding diversification”. Higher interest rates, recession fears, and a tepid IPO market have made it difficult for startups to raise additional capital.

SVB’s dramatic decline comes shortly after crypto-focused bank Silvergate announced its plans to liquidate. SVB said in its letter that it has minimal exposure to crypto.

– CNBC’s Michael Bloom contributed to this report.


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