Silicon Valley Bank Seeking Buyer After Failed Capital Raise

• Silicon Valley Bank is reportedly seeking an external acquisition after its efforts to raise $2 billion in capital have failed.
• Shares of the bank were down 62% in pre-market trading on Friday, which has been halted.
• The bank announced a planned total raise worth $2.25 to strengthen its financial position and reposition its balance sheet.

Silicon Valley Bank Seeking Acquisition After Capital Raise Fails

Silicon Valley Bank (SIVB) is reportedly seeking external acquisition after its efforts to raise over $2 billion in capital have failed. According to CNBC’s David Faber, Silicon Valley Bank has „hired advisors to seek a sale,“ a result which is „not unexpected.“ Shares in the bank were down 62% in pre-market trading on Friday, for which trading has now been halted.

Capital Raise Details

The bank 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 portfolio with the intention to reinvest the money, which it said would realize an earnings loss of $1.8 billion.

Reactions

CNBC’s David Faber commented that given their inability to raise capital and deposits fleeing at a rapid rate, it was not unexpected that they would seek a sale. PayPal co-founder Peter Thiel’s Founders Fund advised companies yesterday to withdraw money from SBV due concerns surrounding their stability amidst potential acquisitions or restructuring activities by potential buyers outside of traditional banking circles.

Outlook

It remains unclear if Silicon Valley Bank will be able to secure an acquisition or what kind of buyer may be interested at this point in time; however, the news has led many investors and analysts alike speculating about possible outcomes for one of America’s biggest tech banks amid challenging market conditions brought on by COVID-19 and other factors beyond their control.

Bottom Line

Silicon Valley Bank’s failure to raise capital has left them looking for potential buyers as they attempt to stay afloat during these difficult times; however, any deal is far from guaranteed as uncertainty continues around both their future and potential buyers‘ interests moving forward into 2021 and beyond