SVB Financial, the holding company for Silicon Valley Bank, saw its stock collapse Thursday after announcing a stock sale and capital raise.
Shares plummeted $160 or 60% on Thursday as investors rushed to sell and also plummeted on Friday morning leading to a halt in trading.
The problems started Thursday when SVB Financial announced it would sell $1.25 billion in common stock and another $500 million in preferred stock to shore up its balance sheet. The company said investment firm General Atlantic would purchase $500 million in common stock from the company. SVB also sold its entire securities portfolio for $21 billion, leading to a $1.2 billion loss for the quarter.
Silicon Valley Bank, based in Santa Clara, is the leading bank in the area for venture capital firms and start-up companies. News of the bank’s problems have led to clients moving their money as fast as possible.
Bloomberg reports that Peter Thiel’s Founders Fund has urged its portfolio companies to move money out of Silicon Valley Bank. Other venture capital firms are also recommending that their companies also move their funds according to Bloomberg.
CNBC reports that SVB Financial is looking to sell the company as the run on its bank are dooming its survival. Unless the federal government steps in to guarantee the bank’s liquidity, customers will likely continue to withdraw their money.