Silicon Valley Financial institution Monetary in talks to promote after failed makes an attempt to lift capital, sources say
SVB FinanceSilicon Valley Bank’s parent company is in talks to sell itself, sources told CNBC’s David Faber.
Attempts by the bank to raise capital have failed, the sources said, and the bank has hired advisers to explore a possible sale.
Large financial institutions are considering a possible purchase of SVB. However, deposit outflows have so far outpaced the sale process, making it very difficult for potential buyers to make a realistic assessment of the bank, the sources told Faber.
Shares in the bank fell 60% on Thursday after SVB announced a plan to raise more than $2 billion in capital on Wednesday night. The stock fell another 60% in premarket trading on Friday before being halted on pending news. Shares did not open for trading with the rest of the market at 9:30am ET and were still on hold.
Under the terms of a plan released Wednesday, SVB wanted to sell $1.25 billion of common stock and $500 million of other convertible preferred stock.
SVB also announced an agreement with investment firm General Atlantic to sell its common stock for $500 million, although that agreement was conditional on the closing of the other common stock offering, according to a securities filing.
SVB is a big bank for venture-backed companies and cited customers’ cash burn as one reason for seeking additional capital.
However, rising interest rates, recession fears and a slowing IPO market have made it harder for early-stage companies to raise more money. Apparently, this has led to companies withdrawing their deposits from banks such as the SVB.
Wall Street analysts said on Thursday and Friday that problems at SVB were unlikely to spread to the wider banking system. Morgan Stanley said in a note to clients that SVB’s problems are “highly idiosyncratic”.
Also on Wednesday, SVB announced it had sold $21 billion worth of securities to raise cash and shift its balance sheet to shorter-duration assets that are less vulnerable to rising interest rates. SVB estimated it suffered a loss of $1.8 billion on that sale.
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