Silicon Valley Bank's Liquidity Crisis Rocks Tech World - Does It Have a Broader Impact?

Silicon Valley Bank's Liquidity Crisis Rocks Tech World - Does It Have a Broader Impact?

Silicon Valley Bank is facing a bank run, according to experts.

“The startup industry is reeling in the fallout of a financial squeeze at Silicon Valley Bank, which is selling bonds and raising cash to cover deposits. This restructuring has spurred withdrawals that risk devolving into a full-blown panic,” writes PitchBook.

Financial experts are raising concerns about the regulatory review and it is sparking concerns that this bank trouble could be the beginning of a bigger problem.

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“The bank's crisis points to spreading turmoil throughout the venture ecosystem, and raises questions about the ability of many startups to weather the current economic downturn,” writes PitchBook. “Investors are divided over how to respond—some are urging patience, others telling startups to pull money out.”

 

Bigger Picture

The Wall Street Journal reports Friday, "Investors dumped shares of SVB Financial Group [SIVB -60.41%decrease] and a swath of U.S. banks after the tech-focused lender said it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits.

The four biggest U.S. banks lost $52 billion in market value Thursday. The KBW Nasdaq Bank Index notched its biggest decline since the pandemic roiled the markets nearly three years ago. Shares of SVB, the parent of Silicon Valley Bank, fell more than 60% after it disclosed the loss and sought to raise $2.25 billion in fresh capital by selling new shares."