Silicon Valley Bank Seeks External Acquisition After Failed Capital Raise
Silicon Valley Bank (SIVB) is reportedly seeking external acquisition after its efforts to raise over $2 billion in capital have failed. Shares in the bank were down 62% in pre-market trading on Friday, for which trading has now been halted.
According to CNBC’s David Faber, Silicon Valley Bank has “hired advisors to seek a sale,” a result which is “not unexpected.” The bank’s stock plummeted 60% on Thursday after it announced a planned total raise worth $2.25 to “strengthen its financial position” and “reposition” its balance sheet.
This included plans to sell $1.25 billion in common stock, $500 million of convertible preferred shares, and another $500 million common stock sale to General Atlantic (which was contingent on the success of the previous common stock sale). SVB also sold “substantially all” of its Available for Sale securities.
The bank’s struggles come as a surprise to many, as it has been a major player in the tech industry for years. Silicon Valley Bank has been a key lender to many of the biggest names in tech, including Apple, Google, and Facebook.
However, the bank has been hit hard by the economic fallout from the COVID-19 pandemic. Many of its clients have struggled to stay afloat, and the bank has been forced to write off a significant amount of bad debt.
Silicon Valley Bank’s troubles are a reminder of the challenges facing the financial industry in the wake of the pandemic. Many banks are struggling to stay afloat as the economy continues to falter, and it remains to be seen how many will be able to weather the storm.
