Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments

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and now this:
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https://www.thestreet.com/technology/svb-ceo-sold-3-6-million-worth-of-shares-before-banks-collapse

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Filthy.

Becker was trading under a 10b5-1 plan, made effective Jan 26, 2023. The timing looks bad, but probably just lines up with his vesting. I didn't see a consistent pattern in the last two years of his sales, so it's hard to say for sure. Most likely if the required filing period was longer, he'd have filed earlier and it'd still look the same.
 
Becker was trading under a 10b5-1 plan, made effective Jan 26, 2023. The timing looks bad, but probably just lines up with his vesting. I didn't see a consistent pattern in the last two years of his sales, so it's hard to say for sure. Most likely if the required filing period was longer, he'd have filed earlier and it'd still look the same.
By pure law, he appears clean (not an 'expert'). It's just... filthy, either way.
 
Becker was trading under a 10b5-1 plan, made effective Jan 26, 2023. The timing looks bad, but probably just lines up with his vesting. I didn't see a consistent pattern in the last two years of his sales, so it's hard to say for sure. Most likely if the required filing period was longer, he'd have filed earlier and it'd still look the same.
if he had faith in the company, wouldn't he buying up shares instead of selling?

"Top-level insiders such as C-suite executives tend to have a good understanding of their companies’ prospects. If they’re buying company stock, it’s a sign that they’re confident about the future and that they expect the stock to rise.

In this report, we are going to highlight a substantial stock purchase from a top-level insider"
 
SVB was the highest-paying publicly traded bank in 2018, with employees getting an average of $250,683 for that year
SVB bonuses range from about $12,000 for associates to $140,000 for managing directors
 
It also amuses me because when people get worked up about banks I always have to ask: What alternative is better? Banks are far from perfect, but so far they seem to be the best solution to hold your money particularly when regulated and insured.

You could hold your money yourself in cash or gold, but this has the problem of the ability to easily transfer it over distance, and the bigger problem of security/reliability. If you get robbed or have a fire, you can lose everything with no recourse. It becomes hard to provide adequate security for large amounts as well. Like if you have a couple hundred in your house, no big deal, you aren't going to be targeted. However if you keep your $500k in retirement savings in your house, that's a reason to target you, and for people who are reasonably well equipped to do so. Hard to design an adequate defense for it, at least without spending a ton.

You could do crypto but oh man, is that a minefield. If you keep all your crypto yourself, in your own wallet, again security is 100% on you, and again the more you have the bigger a target you are but now it isn't just people who can physically get at you that you have to worry about (though you still have to worry about them) but any kind of cyber-attack. If you keep it in an exchange, well congratulations you are keeping it in a bank, just a bank that is unregulated and opaque. The amount of fraud and scams that are rampant in that space should be an indicator of the lack of safety there.

So... then what? Really what it comes down to is that banks (or credit unions) are the safest option, particularly if they are insured. You won't make much money doing that, heck with current interest rates you'll lose a bit to inflation even in high yield accounts, but you have better protection than any alternatives.
as an electrician i've done a number of high end homes with safe rooms and even my uncle, his wife's a doctor and in their detatched garage they have one with a bank vault door all the walls and ceiling are concrete, and if you have something like that, keeping gold, silver, and guns is really better than keeping it in a bank. gold has never done anything besides go up in value, even in times of inflation. really if people were smart they'd be stocking up on some now.

you just don't go advertising to everyone or anyone what you have in there. but i'm sure they've all got tons of money tied up in banks too.

on a side note: i even wired a house we were building for the ceo of amerigroup that ended up a senator of virginia that not only had a safe room, but a secret passage in the back of his closet that had a ladder going up in to the attic where he kept a bunch of guns. kinda cool, but i guess when you're running a corporation that's probably screwing a lot of people over and you're worth a ton of money you start to get a little paranoid?
 
as an electrician i've done a number of high end homes with safe rooms and even my uncle, his wife's a doctor and in their detatched garage they have one with a bank vault door all the walls and ceiling are concrete, and if you have something like that, keeping gold, silver, and guns is really better than keeping it in a bank. gold has never done anything besides go up in value, even in times of inflation. really if people were smart they'd be stocking up on some now.

you just don't go advertising to everyone or anyone what you have in there. but i'm sure they've all got tons of money tied up in banks too.

on a side note: i even wired a house we were building for the ceo of amerigroup that ended up a senator of virginia that not only had a safe room, but a secret passage in the back of his closet that had a ladder going up in to the attic where he kept a bunch of guns. kinda cool, but i guess when you're running a corporation that's probably screwing a lot of people over and you're worth a ton of money you start to get a little paranoid?

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https://www.ft.com/content/6a77d81b-7376-4ccf-80a2-3336af04d04b
https://www.ft.com/content/6a77d81b-7376-4ccf-80a2-3336af04d04b
 
SVB was the highest-paying publicly traded bank in 2018, with employees getting an average of $250,683 for that year
SVB bonuses range from about $12,000 for associates to $140,000 for managing directors
I doubt employees getting paid well has anything to do with this. Most likely they tied up their money in assets. From reading articles, they had to sell U.S. Treasury bonds at a loss, but I doubt that's the only assets they had laying around. They bought assets low and wanted to sell high but that hasn't worked out for them.
 
why don't these big companies stick to the big banks like JP Morgan Chase, Bank of America, Wells Fargo, Citibank?...why use these smaller no-name banks (Silicon Valley Bank)?...you know that the big banks aren't going to go under or have any financial crash and your $$ is safe
16+ years in the banking tells me it's partially due to industry specialization and the economies of scale that go with that horizontal integration. For example, in banking when we process payments between a payor and payee who are both our customers, we refer to these as "on us" transactions and it's exponentially cheaper (and faster) to process "on us" payments than going through ACH, FedWire, etc. networks. Take City National Bank, who've built a reputation for serving the film and entertainment industries, they're essentially a one stop shop for financing and payment processing between studios, talent, vendors, etc.
 
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gold has never done anything besides go up in value, even in times of inflation
Gold bought in the 1980s has yet to just get back to its original value.

Gold is good at maintaining its value, not really at gaining:
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https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

It did not triple in value since 1940, adjusted for inflation, an simple S&P 500 index with dividend reinvested made 260 time the money.

I doubt employees getting paid well has anything to do with this. Most likely they tied up their money in assets. From reading articles, they had to sell U.S. Treasury bonds at a loss, but I doubt that's the only assets they had laying around. They bought assets low and wanted to sell high but that hasn't worked out for them.
That a bit of a strange things to say, how would you not tie up their money in asset (keeping many many billions in actual cash in a safe seem risked, costly and with the inflation quite harsh, a lot of the money kind of need to be) ? They did not necessarily wanted to resell those Treasury bonds, could just have maintained them forever to keep the balance sheet, they had to sell because of the bank run
 
When you hold giant amount of US treasuries and interest rate more than double on them, it will be quite harsh on your balance sheet.

Will have to see but it must have been rare for people to get in big trouble for having betting to much on long term US treasury before like that.

That was part of the story. They also loaded up on mortgage backed securities, which recent history shows is totally the most secure bet in US banking and has totally never led to any problems….</sarcasm>

So, double-whammy for these guys, basically.
 
if he had faith in the company, wouldn't he buying up shares instead of selling?

If you're getting paid in stock and you don't sell the stock, you're working for free. He probably had lots more shares vesting over time. Diversifying away from employer stock is just smart personal finance. You never know when there's going to be a banking industry issue, better to have less single source risk. (In this case, the call came from inside the house)
 
This kind of thing is FDICs bread and butter. Come in on friday, get things working by Monday. There's a good chance the bank will be sold ovee the weekend and all the deposits will be good on Monday. If not, insured depositors will be 100% liquid on Monday and the rest are going to have to wait and see. I guess we'll see if any other banks suffer runs in the weeks ahead.
In fact, they normally do it at 5PM on friday intentionally for that reason - no impact to consumers that way, minus ATM access over the weekend possibly. This time they had to move faster.
If there's a move toward safety, that tends to be treasury instruments, which makes most of these banks' balance sheets look better, at least a little. If everyone with $10M at one bank splits it up to 40 banks, they still have $10M in deposits at banks, and chances are the big banks are going to see about the same amount of deposits as before. Just without all the account holders listening to Peter Thiel all at once.
Which is what this was supposed to be - aside from the Treasury department telling people for a long time that rates wouldn't increase, there's no "safer" investment than the bonds and the like they held. The issue here was threefold:

1. Paper losses that had to become real losses, because interest rates went WAY up. The investment was STILL good - if they'd been able to hold to maturity, they'd have gotten their 1.79%, and everything would have been fine. The problem with this point was that VC firms and tech startups burn cash when they can't keep using loans/VC funds to operate, which meant SVB needed the CASH in the short run - which they didn't have enough of for everyone to need. Plus, the moment you sell ANYTHING in the HTM portfolio, you have to (effectively) sell the whole damned thing by law - so they had to take ALL of the losses at once. Again, they had the capital to cover it - they could have - they just ran out of runway to do so.

2. Botched messaging - selling capital (shares of the company) to generate cash in the short term is not a big deal. This happens frequently - heck, it's the OTHER source of funding most startups / VC firms use to generate cash. They messaged it at the WRONG time (the other bank that shut down on the same day), and in the wrong way (EDGAR filings and a crap-ton of accountant speak, for a clientele that is all tech folks on twitter). - of course, they HAVE to announce it, with a 4 day window, so they might not have had a choice. The CEO then spitting out the "don't panic" line was the wrong thing to do. This triggered the run that killed the runway for point 1.

3. Their shorter term investments and things like MBS have had payback-times reduced significantly because interest rates have gone up (see point 1) - folks normally refi, take new loans, etc - which means an MBS security is generating a cash flow. Actual redemption time on them tends to be in the 10 year range, even though they're 30 year packaged mortgages. No one is doing that right now - so those still hold their base value, but generated no cash flow in major repayments (just the base coupon rates on the payments into them). This reduced cash flow, which ties to 1/2 - and extended the redemption time on them to closer to the full 30 years, which was WAY too long for customers that are burning cash.

FDIC only insures up to $250,000...so spread out your $$ in multiple banks so all of it is insured
So you're going to handle payroll for a billion dollar company out of... several thousand banks?

SVB was primarily (90%) for businesses - not individuals.
Absolutely, at least to a point. A few of these companies would have to use thousands of separate banks to keep their money insured. I can't imagine what inspired ROKU to keep hundreds of millions in a single bank.
Check the depositor list - it's a who's-who of big tech firms. EVERY major company keeps millions in a handful of banks - it's the only sane way to manage it. You keep a close eye on their balance sheets and do what you need to - corporate finance and banking are distinctly different from individual or small business.
You keep enough in the bank to cover payroll for a few weeks up to the maximum the bank insures and then you keep the rest in assets.
Payroll is often well well past the FDIC limits. That doesn't really work.
Be it investments in other companies, bonds, commodities, or real estate. Preferably assets you can either convert quickly or use for financing should you ever need their value. Of course this is silicon valley, so much of what it does is hype, slight of hand, fraud, or high(420) hopes. These people tend to be pretty full of the silicon valley Kool Aid.
Which, ironically, is what the bank actually did - and they had short term investments as well, just not ones that could be liquidated THAT fast, or that held enough value. This is something a LOT of banks are doing - SVB just got caught first because their primary clientele has a HUGE cash burn compared to most other industries.
why don't these big companies stick to the big banks like JP Morgan Chase, Bank of America, Wells Fargo, Citibank?...why use these smaller no-name banks (Silicon Valley Bank)?...you know that the big banks aren't going to go under or have any financial crash and your $$ is safe
1. They often do, when they're large enough for it to make sense, and when they can, because:

2. SVB had a requirement that if they were handling your IPO or your VC funding portion, you had to bank with them too. Legal. Allowed. Not uncommon. Also what they specialize in - and they were VERY good at it too. Half the companies I worked for in the past used SVB for at least part of their banking - if not as their primary - until they got to a certain size. If you're growing and taking VC funding - it's where you went.

3. Merrill Lynch. Lehman Brothers. Shit happens.
Bail outs inc ?


Completely disagree.

Investigate/prosecute if criminal behavior discovered. Leave the US taxpayers out of it outside of the prosecution bill.
Sadly there's almost certainly no criminal behavior - just a bad bet (not hedging the HTM portfolio enough as interest rates rose) and not realizing that your clientele's cash burn is directly correlated to interest rates (rates go up, they use more pure cash instead of the alternative). Which means that your cash reserves are inversely tied to interest rates, in short.
if he had faith in the company, wouldn't he buying up shares instead of selling?
It's part of the compensation package. Many sell stock regularly to generate the cash they use on a regular basis - salaries are often pretty low (and heavily taxed) compared to stock options or restricted stock. Plus, since it's part of your comp package, you don't want it sitting with a volatile valuation when you could have cash for at least some of it - that would effectively make your comp package disappear if something happened (no joke intended).
"Top-level insiders such as C-suite executives tend to have a good understanding of their companies’ prospects. If they’re buying company stock, it’s a sign that they’re confident about the future and that they expect the stock to rise.

In this report, we are going to highlight a substantial stock purchase from a top-level insider"
There are limits to what they're allowed to sell, buy, transfer - a lot sell regularly because that's how they get ~paid~. They keep some sure, but $$ = selling stock.
That was part of the story. They also loaded up on mortgage backed securities, which recent history shows is totally the most secure bet in US banking and has totally never led to any problems….</sarcasm>
They were perfectly secure - just too long term, in this case, and not generating cash flow. Even the MBS they held were gov backed - they just didn't generate redemptions like they used to, and the T-bill investments lost value too - both because interest rates went up that much. Both would have paid out in full at the maturity time - just not soon enough.
So, double-whammy for these guys, basically.
Bingo.
 
Old dude talking out of his ass. He had absolutely zero points to make other than "the economy is in a tough spot right now" - no citations of "woke" actions hurting the bank, hurting the balance sheet, or anything related to the actual incident. There's nothing that a social program did to affect interest rates - this was just the CEO of the bank and the decision makers making a bad decision and not hedging it when it SHOULD have been clear that they needed to. When interest rates started rising they should have raised capital then - or recognized that they needed alternative short-term investments to provide a counter weight on the balance sheet. Sell the ATM (available to market) portfolio, take the smaller loss there, and then start hedging. Or sell capital to raise liquid funds.

That's where they went wrong - nothing to do with anything liberal, conservative, or otherwise - just poor financial choices. Oh, and REALLY shitty messaging.
 
as an electrician i've done a number of high end homes with safe rooms and even my uncle, his wife's a doctor and in their detatched garage they have one with a bank vault door all the walls and ceiling are concrete, and if you have something like that, keeping gold, silver, and guns is really better than keeping it in a bank. gold has never done anything besides go up in value, even in times of inflation. really if people were smart they'd be stocking up on some now.

you just don't go advertising to everyone or anyone what you have in there. but i'm sure they've all got tons of money tied up in banks too.

on a side note: i even wired a house we were building for the ceo of amerigroup that ended up a senator of virginia that not only had a safe room, but a secret passage in the back of his closet that had a ladder going up in to the attic where he kept a bunch of guns. kinda cool, but i guess when you're running a corporation that's probably screwing a lot of people over and you're worth a ton of money you start to get a little paranoid?
Well three things there:

1) Still has the problem I said with ability to send/move money. Money in gold is hard to use. You have the money, in theory, but sitting in your basement makes it hard to do anything with.

2) Gold has NOT always gone up. It jumps all around and is a pretty shitty investment historically. If you look at it from 1980 until now it is about flat, inflation adjusted, actually down slightly. Because it is so volatile, you can pick points where it did better and went up, or other where it did worse and went down but no, it is not something that only goes up.

3) You are talking about things for rich people, this doesn't apply to most normal people. Most people cannot reasonably afford to have a special high-end room built for trying to keep their money secure.


You really are a whole lot safer as an individual keeping your money in banks (or credit unions). Between the regulation, the tracking of movement of money, and the insurance you are extremely unlikely to lose your funds, even if a bank fails, even if there's an error, etc. Am I saying that there's 100% no way for you to lose your money? No, of course not, I'm just saying it is the best solution you have, anything else is less secure overall.
 
The all in podcast had a good special episode about it.



Triple issues hitting around the same time
1) Less people putting money in has silicon valley vc went down after the 2021 peak
2) Lot of company spending at the same rate than went money went in, taking money out of the bank
3) Sudden interest rate hike

There an loophole that make it so that on a balance sheet long term treasury can be kept at face value instead of market value, making a bad incentive to remove the interest rate hike risk on them at least has long as you do not have to sale them it will look much more solvent than the bank actually is.
 
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There an loophole that make it so that on a balance sheet long term treasury can be kept at face value instead of market value, making a bad incentive to remove the interest rate hike on them at least has long as you do not have to sale them it will look much more solvent than the bank actually is.
Not precisely a loophole as much a regulation that hadn't been tested like this - at least not in an industry with this kind of cash burn. The intent there is that anything in the HTM (Hold to Maturity) portfolio has to be stuff that will be worth at LEAST what it was purchased for at maturity - hence why they don't have to report a loss on it, because technically it'll be worth (in the end) exactly what it's supposed to be worth (plus the interest paid on it). It's SAFE. Unless you don't trust the US Government to pay its bills.

Till you MUST have the money, at which point any losses (or gains, it goes both ways) are ~immediate~ and take effect. And you have to do ALL of it - not part of it. The whole portfolio swings to ATM (Available To Market) and you take the hit.

Every bank has stuff in a HTM portfolio like this. Many hedged against it as their customers don't have the cash burn (see JPMC, WF, etc) - they were able to use deposits to purchase hedges and counter-weights to the HTM portfolio being technically underwater and will ride it out till the end (barring a massive run on all banks, which would even hit the others hard). This is absolutely ~not~ unique to SVB - it's just that SVB has an extremely homogenous customer base that all has a MASSIVE cash burn during times of high interest. Oops?
 
The intent there is that anything in the HTM (Hold to Maturity) portfolio has to be stuff that will be worth at LEAST what it was purchased for at maturity
From my understanding, the issue is that Treasury that is not to be necessarily hold to maturity also benefit from it and are the only exception.
 
From my understanding, the issue is that Treasury that is not to be necessarily hold to maturity also benefit from it and are the only exception.
Not following you. Anything in that portfolio must be held till the end - or the whole portfolio sold.

Other treasuries held are in the ATM portfolio and have different reporting requirements - they may be hidden for a bit but must show on the 10k before long (might be quarterly might be annually - I’d have to look it up). Those profits/loss hit differently. Anything in HTM is 100% unrealized.
 
what's going on with those woke prorgams being promoted tho? just curious
It's a tech bank based in CA. Over half the companies out there have diversity programs/etc, and they're especially prevalent in the tech industry - that has nothing to do with the collapse of the bank.
 
Other treasuries held are in the ATM portfolio and have different reporting requirements
That would be the thing (from my understanding), they do not, they still use face value instead of market value has an exception.
 
Um whatever.. It's a "tech bank", more specifically a "tech venture capital bank". The the tech companies involved with SVB withdrew substantial assets because of the interest rate hikes. The deposits at SVB then ran short. This in turn was published and a complete run on withdrawing everything ensued - causing the SVB collapse.
 
KIND OF a bail-out. At least for the depositors.
Remember: "trust in the US financial system" translates to "No consequences for risky, unsustainable behaviour"

Thank you, taxpayers. The irresponsible leaders won't have to sell their 3rd yacht. It was getting a bit tense there!
 
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Remember: "trust in the US financial system" translates to "No consequences for risky, unsustainable behaviour"

Thank you, taxpayers. The irresponsible leaders won't have to sell their 3rd yacht. It was getting a bit tense there!
This is no cost to taxpayers as the member banks of FDIC pay for it.
 
This is no cost to taxpayers as the member banks of FDIC pay for it.
And where are the member banks going to get these Billions of dollars to bail these poor, scrappy entrepreneurs out? Last I checked they were only legally obligated to keep 250K on hand per-account.
 
KIND OF a bail-out. At least for the depositors.
Not really, no.
Remember: "trust in the US financial system" translates to "No consequences for risky, unsustainable behaviour"
There will hopefully, and should be, consequences for those operating the bank. Innocent depositors however - the system isn't sustainable at a corporate level with the current FDIC rules. That's just insanity - someone like HP or Cargill would literally have tens of thousands of bank accounts to make payroll or the like, nevermind long term operating budgets.
Thank you, taxpayers. The irresponsible leaders won't have to sell their 3rd yacht. It was getting a bit tense there!
That's not what it means. They were already going to almost certainly be made whole (the depositors) once assets and associated capital were sold off - including the treasuries and other investments the bank holds - it's just that doing so takes time, and the customers of the bank need cash now. Several states (CA included) have liability rules that the board and C-level executives are personally liable for missed payroll - which means that if the customers of SVB can't pay their workers, they have to either take mass furloughs - or lay them off. Which would be devastating to the economy in a pile of different ways - especially since they'd also be stopping payments and invoices due to companies otherwise unaffected.

Assume for a second that the FDIC limit was all that was released for now - how do you make payroll with 250k? How long can you wait for access to millions (or even billions) of dollars of CASH that you need from an operating perspective? Especially given that much of that cash was T-bills that technically the US Government owes the bank (if not for 8 more years)... This is a guarantee that you can trust the banking system.

And the real reason is that if suddenly this becomes a concern, then a pile of OTHER smaller banks are going to fail - and then JPMC, WF, etc are going to take a MASSIVE hit, as will the bond market and the stock market, as none of them have cash-on-hand to cover 100% of deposits (or even the amount over FDIC limits) either. No one does - that's why it's called fractional reserve banking.
And where are the member banks going to get these Billions of dollars to bail these poor, scrappy entrepreneurs out? Last I checked they were only legally obligated to keep 250K on hand per-account.
From the assets and owed money of SVB. These weren't bad investments - they were poorly timed. Unless you believe T-bills are an unsafe investment?
This is no cost to taxpayers as the member banks of FDIC pay for it.
Bingo. And the treasury may simply redeem out various bonds/etc that were owned too. First time something like this has happened that I can think of - it will be interesting to see how they unwind this. I could see them "buying back" the bonds for now (it'd technically save the government money for the moment), or making a sweet deal for someone else to cash them out... lots of ways to skin the cat, just not sure which they'll do.
 
Same old shit as before? Moral hazard, no?
 
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