SVB Financial: What Went Wrong, and What Happens Next?
SVB Financial Group (NASDAQ: SIVB), the parent company of Silicon Valley Bank, has had a turbulent few days. Shares fell by more than 60% on Thursday after news emerged that the bank needed to raise capital, and trading was halted Friday after another 60% plunge in premarket activity. While the bank's 52-week high was just shy of $600 per share, it was trading for less than $40 in Friday's premarket session. And now regulators have officially closed the bank.
Here's how SVB went from being a massive success to being shut down by banking regulators, what we know so far, and what might happen next.
SVB Financial reported a few major problems to investors recently. The bank sold substantially all of its available-for-sale securities -- $21 billion worth -- at a $1.8 billion loss, mostly in the form of U.S. Treasury securities. In simple terms, SVB received a massive volume of deposits during the 2020-2021 tech boom and invested the proceeds into long-term Treasury bonds while interest rates were low. Now that interest rates are higher, the market value of those Treasuries is substantially lower than SVB paid.
Source Fool.com
