- Trading in the stock was halted several times during the session due to volatility.
- The company said in a letter from CEO Greg Becker on Wednesday that it has sold “virtually all” of the securities available for sale.
- The sale of securities will result in an after-tax loss of $1.8 billion, the SVB letter said.
In this photo an image of the trading chart TradingView of SVB Financial Group displayed on a smartphone with the logo of SVB Financial Group in the background.
Igor Golovniov | Rocket | Getty Images
Shares of technology-focused bank SVB Financial fell more than 50% on Thursday after the company announced a plan to raise more than $2 billion in capital to help offset losses from bond sales.
Trading in the stock was halted several times during the session due to volatility, and the decline pushed SVB’s market cap below $8 billion.
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SVB Financial fell sharply after the bank announced a plan to raise more money.
The company said in a letter from CEO Greg Becker on Wednesday that it has sold “virtually all” of the securities available for sale and was seeking $2.25 billion between common stock and convertible preferred stock.
Investment fund General Atlantic has already pledged to contribute $500 million of that total, the letter said.
The sale of securities will result in an after-tax profit loss of $1.8 billion, the letter from SVB said, but the company added that its plan to reinvest the proceeds should be “immediately positive” as the bank expands its balance sheet. reforms.
The company previously reported $28.8 billion in available-for-sale securities on its balance sheet at the end of December, as well as $95.3 billion in held-to-maturity securities. Available-for-sale securities were primarily US Treasuries.
The Federal Reserve has aggressively raised interest rates over the past year, which can lower the value of bonds, especially bonds with maturities of many years. SVB said it will reinvest the proceeds from the sale in shorter-term assets.
The bank cited higher interest rates and “increased cash burn from our customers” as reasons for raising the new capital. The company is heavily involved in start-up companies, saying on its website that nearly half of all venture capital-backed technology and life science companies in the U.S. bank with SVB.
Wells Fargo banking analyst Mike Mayo said in a note to clients that SIVB’s problems appeared to be caused by “a lack of funding diversification.” Higher interest rates, recession fears and a lukewarm IPO market have made it more difficult for startups to raise additional capital.
The dramatic drop for SVB comes shortly after crypto-focused bank Silvergate announced liquidation plans. SVB said in its letter that it has minimal exposure to crypto.
– CNBC’s Michael Bloom contributed to this report.