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

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erek

erek

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Big Impact on Big Tech and Start Ups

“It remains to be seen how many more companies will be affected by the collapse of Silicon Valley Bank. News outlets are today reporting that Roblox Corporation, Rocket Lab and Vice Media are SVB customers. Financial analysts are keeping an eye on the resulting fallout, and predictions have been posited regarding the fragile status of certain banking groups. The US Federal Reserve, as well as other international central banks, have sharply raised interest rates and borrowing costs in attempts to dampen the effects of inflation. This has had a knock-on effect on the bond market - portfolios decline in value as interest rates rise.”

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Source: https://www.techpowerup.com/305778/...ch-industry-roku-divulges-its-svb-investments
 
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erek said:
Also they to be hiring at svb: https://svb.wd5.myworkdayjobs.com/svbank
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They were hiring. They had over $50B withdrawn. They weren't expecting that. Wonder who was behind it?

Banks suck (spending hours today trying to close an account), but an FDIC insured account is one of the safest place to store your fiat. Banks will still steal your money through inflation, though.

There must have been some gambling like interest returns at SVB to have all these companies deposit their money there.

Reminder to pay attention to where you are storing/investing your money.
 
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They released some "bad news" about needing some money to shore up their books. It got hyped up and panic withdraws sent them over the edge right at the worst time possible.

FDIC only insures up to $250K, so those who had millions in their bank accounts (companies mainly) are the ones facing an uncertain future at this point. From what I read, that actually accounts for over 90% of the deposited money, because a lot of big companies used this. Sounds like there might be a lot of collateral damage, but it won't affect the average Joe who might have had some random bank account there.
 
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.
 
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GotNoRice said:
They released some "bad news" about needing some money to shore up their books. It got hyped up and panic withdraws sent them over the edge right at the worst time possible.

FDIC only insures up to $250K, so those who had millions in their bank accounts (companies mainly) are the ones facing an uncertain future at this point. From what I read, that actually accounts for over 90% of the deposited money, because a lot of big companies used this. Sounds like there might be a lot of collateral damage, but it won't affect the average Joe who might have had some random bank account there.
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With the exception of the average joe not being able to pay their mortgage, buy groceries, pay bills, etc.

It also sound like this is the tip of the iceberg. There are many banks out there with unrealized losses. I have a feeling people are going to start freaking out and pull their money from these other banks, soon. Hold on, it's going to be a bumpy ride.

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techie81 said:
With the exception of the average joe not being able to pay their mortgage, buy groceries, pay bills, etc.
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They said straight-up that branches will be open and people will be able to make withdraws on Monday, for anything that was FDIC insured (again, anything up to $250,000). So I guess that might have screwed up your weekend shopping trip (assuming that you don't have a 2nd credit card or something) but that's about it.
 
GotNoRice said:
They said straight-up that branches will be open and people will be able to make withdraws on Monday, for anything that was FDIC insured (again, anything up to $250,000). So I guess that might have screwed up your weekend shopping trip but that's about it.
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That's really easy to say when you aren't personally affected. I have zero trust in the government's ability to fix this quickly and to backstop the future avalanche of pending financial doom.
 
techie81 said:
That's really easy to say when you aren't personally affected. I have zero trust in the government's ability to fix this quickly and to backstop the future avalanche of pending financial doom.
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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.

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.
 
GotNoRice said:
That's fine, but if your conclusions are based solely on your personal fears instead of the facts, you should probably include that in your post.
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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.
 
FDIC only insures up to $250,000...so spread out your $$ in multiple banks so all of it is insured
 
polonyc2 said:
FDIC only insures up to $250,000...so spread out your $$ in multiple banks so all of it is insured
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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.

erek said:
Where to put it?

Also they to be hiring at svb: https://svb.wd5.myworkdayjobs.com/svbank
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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. 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.
 
Twisted Kidney said:
ROKU to keep hundreds of millions in a single bank.
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To be fair when you have 1.4 billion of cash-near cash reserve, that would be a lot of different 250k to split over (like 6,500 bank with the management cost that would go), that 6 weeks or so of expense for a company like Roku that was in that bank (i imagine it is more complicated than that a lot of their expense are not in cash, etc... just look on yahoo finance what their yearly total expense look like).
 
Companies with excess cash reserve do keep a portion of their money in T-bills as "cash equivalents" and/or short term marketable securities (like buying some other companies commercial papers with good credit rating) as reported in the company 10-K/10-Q report while keeping enough liquid cash in banks and/or issuing short term commercial papers themselves to pay wages, vendors, service debt interests, etc on a periodic basis. The question, is how much a CFO would put all the cash in banks knowing the limit on the FDIC insurance. Likely that they will spread the risk.

BTW, Apple short term commercial papers for the same duration as T-bills are paying lower interest rate. Anyway, I'm digressing.
 
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
 
They weren’t top 3 largest banks, but were #16. They tied up investments long at low rates and had to sell them at a loss for short term needs, duration mismatch. That worked okay in a falling interest rate world, but that ended last year. Most uninsured deposits will get made whole, eventually. First they wipe out the stock holders, then the bond holders, THEN uninsured deposits if it goes that far.
 
SVB is still a pretty big bank, just more commercially known that retail.

Not sure the answer is more consolidation into the biggest banks. It’s hardly been good for the average person as that’s gone on for the last 20 plus years.

Heck I did economics and worked for big banks back in the day and even I’d tell you repealing Glass Steagall and the resulting, inextricable, rise of JPMC and BoA has probably been on balance bad for the individual borrowers and arguably investors.
 
polonyc2 said:
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
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These 'smaller banks' tend to have aggressive lending incentives, lines of credit for businesses, or in the case of SVB - they got their big break in being the lender for wineries. They developed a robust system of underwriting for wineries that was a big deal. They also had robust in house underwriting scenarios for tech start-ups. Part of this, however, required that the company assets were totally dedicated to their bank. This gave SVB an advantage in acquiring and retaining a variety of clients.
 
polonyc2 said:
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
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We know that big banks never fail or get forced to merge on short notice.

Leaving that alone, SVB had a good reputation for understanding and working with startups, and it was big enough to handle most of those companies as they grew. Changing banks is a pain, so why bother? But I'm guessing people are going to be a lot more careful about holding their VC money in one place after this. At least for like 6 months until everyone forgets everything.
 
The FDIC will make everyone whole, simply because they cant set the precedent that american banks are unsafe. Imagine the chaos.
Everyone calm down please.
 
Verado said:
The FDIC will make everyone whole, simply because they cant set the precedent that american banks are unsafe. Imagine the chaos.
Everyone calm down please.
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No. You will likely see credit card limits being cut though.
 
toast0 said:
We know that big banks never fail or get forced to merge on short notice.

Leaving that alone, SVB had a good reputation for understanding and working with startups, and it was big enough to handle most of those companies as they grew. Changing banks is a pain, so why bother? But I'm guessing people are going to be a lot more careful about holding their VC money in one place after this. At least for like 6 months until everyone forgets everything.
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Lehman brothers bank failed
 
My payroll company has been hosed by this - they did their banking through SVB and now it looks like I'll be cutting paper checks instead of direct deposit as... they no longer have a means to do so. Hopefully they'll have a new bank early next week before I run payroll again...
 
Bail outs inc ?
Mark Cuban wants the Fed to buy Silicon Valley Bank’s debt, pronto. Not doing so, he believes, will shake confidence in the financial sector—and hurt tech startups and their employees.
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Completely disagree.

Investigate/prosecute if criminal behavior discovered. Leave the US taxpayers out of it outside of the prosecution bill.
 
polonyc2 said:
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
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A lot of those banks are inflexible or do not offer services that smaller regional banks do that are critical for tech businesses. Specifically, a lot of lending products are just not available. If you keep a few million dollars liquid with a regional bank you get special treatment; Chase or BoA don't give a shit. At Chase the company I work for has about $1mm in cash and we just get some medium-level point of contact (A business relationship manager) that has zero authority over credit, fraud, etc. They just basically waive wire fees and try to upsell you on a bunch of crappy wealth management products. Our CFO a while back got locked out of our Chase account for "fraud" when in reality their system was totally broken and our BRM was powerless to get him re-instated without a lot of hassle. You have zero weight to throw around at a big bank even if you have 7 figures invested because, well, thousands of others have a lot more. You're a nobody.

We also do business with a smaller regional bank that one of our investors has a few million dollars with. I have the VP of bank's cell phone number as a result, and they are incredibly flexible with complicated lending structures for acquisitions. Chase would just laugh at us.
 
erek said:
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Circle is one of the OG in the crypto space, since '13. Personally, I hope they survive. They are one of the few "fair players" worthy of consumer trust in the crypto space.

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This could be rough for them and associated. Their funding/capitalization is seemingly nowhere close to buffering such a hit. Possible cascades in the crypto side inc very very possible, no doubt about it.


Edit: 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.
 
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