Andrew Lokenauth@FluentInFinance
Mar 11, 2023
11 tweets
Many don't realize the importance of Silicon Valley Bank to the economy & the ripple effects coming
SVB's failure is the beginning of a domino effect throughout tech & start-ups
I've worked in banking for 10+ years so let me explain why you should care & what it means for you:
Over 95% of Silicon Valley Bank's deposits are not insured by the FDIC (due to being over the $250,000 limit)
That is over $160 billion in uninsured customer deposits
About half of all venture capital-funded startups in the US are customers of SVB
That's 65,000 startups
This means that 65,000 startups could miss payroll
This can create huge problems for the startup and tech economy
$SIBV was the 15th largest bank in the U.S by deposits and held $210 billion in assets
SVB was the second-largest banking failure in US history
Silicon Valley Bank is the largest bank to fail since the 2008 financial crisis
The primary reason for the failure of SVB was their choice to invest their customers' deposits in treasury bonds, which are highly impacted by shifts in interest rates
It bought government bonds with fixed interest rates
And as the Fed raised rates, those bonds lost value
Silicon Valley Bank had $80 billion in bonds with an average yield of 1.5%
No one wants bonds yielding 1.5% when the current market is selling bonds with yields over 5%
Silicon Valley Bank has been an important partner of startups, founders, and investors over the last decade
Billions of dollars in venture debt
Silicon Valley Bank's collapse will create a ripple effect throughout the economy
I predict we see a few more regional banks fail
Silicon Valley bank is under the control of the federal government.
But right before the bank collapsed, the Bank's management team sold most of their stock:
• CEO sold 11% of his stock
• CFO sold 32% of his stock
• CMO sold 28% of her stock
Did they know something?
Elon Musk has recently indicated the possibility of Twitter purchasing Silicon Valley Bank and turning it into an online bank:
Be careful who you take investment advice from. One month ago, Jim Cramer urged investors to buy Silicon Valley Bank stock $SIVB at $320
Don't forget, he also said to buy Bear Sterns in 2008.
A friendly reminder that NOBODY knows anything about stock prices.
Many Wall St. analysts also had Silicon Valley Bank $SIVB as a buy:
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Andrew Lokenauth
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