Silicon shares Valley Bank fell on Thursday as it said the company would raise additional capital by selling stock, shift its asset portfolio to higher-yielding assets and extend its borrowing tenure.
Given the recent spate of banking-related carnage in the tech and near-tech worlds, there is concern in the market that all is not well with SVB. The company’s CEO, Greg Baker, said in a call with Venture clients that their assets are protected and that the share sale was announced to increase the bank’s financial flexibility, strength and profitability.
Becker said the bank has “enough liquidity” to support its customers “with one exception: if everyone is telling them SVB is in trouble, that will be a challenge.” “Relax,” the executive told VC clients. That is my question. Let’s be here for 40 years, supporting our portfolio companies, supporting venture capitalists.
The bank’s share price has fallen more than 60 percent compared to last year when it was published.
In a statement to investors related to various financing activities shared last night, the company noted that venture capital firms are investing less and startup clients are still burning – eating – cash at historically high levels. The imbalance resulted in what the company described as pressure on its “funds flow balance”.
TechCrunch is hearing from some of the founders and investors who are encouraging startups to consider raising money with SVB Health. If many do, their actions could exacerbate the imbalance of deposits and withdrawals, possibly prolonging the pressure on the SVB.
In SVB’s mid-quarter update, the company argued for a chart-form low loan-to-deposit ratio of 43 percent. In the coming days, it will become clear how much protection can be afforded following the share price sell-off and concerns among key customers.
TechCrunch has been actively reporting on industry reaction to the SVB news and sale, particularly how startups are choosing to respond. More to come.
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