The US banking system is suffering its worst crisis since 2020. Silicon Valley Bank, aka SIVB, is the 18th largest bank in the US, with $212 billion in assets, of which $120 billion are securities. The bank was funded by over $173 billion in deposits (of which $151.5 billion are uninsured) and has long been viewed as the bank at the heart of the US startup industry due to its singular focus on venture capital (VC) firms.
The SIVB failure was the second biggest in US history. See this in the chart below and learn more here.
The California Department of Financial Protection and Innovation reported that shortly after the Bank announced a loss of approximately $1.8 billion from a sale of investments and was conducting a failed capital raise, and despite the bank being in sound financial condition prior to March 9, 2023, “investors and depositors reacted by initiating withdrawals of $42 billion in deposits from the Bank on March 9, 2023, causing a run on the Bank.” See this in the chart below and learn more here.
Several prominent venture capitalists – such as Peter Thiel – advised their tech startups to withdraw money (as Thiel did before the collapse) from Silicon Valley Bank earlier. How did Thiel know? Would the bank run have happened if it wasn’t for their urging? Or another question: why would some of the VC luminaries actively encourage a bank run? See the commentary from Zerohedge below in their Tweet.
Why are VC icons ganging up and Lehmaning SVB? If your business model relied on QE wouldn’t you try to trigger the next QE too https://t.co/7teJlObiji
— zerohedge (@zerohedge) March 9, 2023
It wasn’t just the Peter Thiels of the world: Prominent venture capitalists advised their tech startups to withdraw money from Silicon Valley Bank, while mega institutions such as JP Morgan Chase & Co sought to convince some SVB customers to move their funds recently by touting the safety of their assets.
Meanwhile, Jim Cramer from CNBC, as little as a month ago, was trying to convince his viewers that SIVB was a buy.
Jim Cramer said Silicon Valley Bank was a buy last month at $320— Inverse Cramer (Not Jim Cramer) (@CramerTracker) March 10, 2023
Today it is being closed by California regulators pic.twitter.com/x1xMBTrQTS
Then there is this from the marvelous Elon Musk.
I’m open to the idea— Elon Musk (@elonmusk) March 11, 2023
As always, to see if a company is doing well, keep your eyes out for what CEOs do – like dumping millions in their own stock before something bad happens. CEO Greg Becker SVB dumped $3.5m two weeks prior to the collapse – there were other executives at SVB too. Nice huh? See this in the chart below and learn more here.
As reported by Zerohedge, there is a long line of depositors who are over the $250,000 FDIC-insured limit (in fact, only somewhere between 3 and 7% of total deposits are insured). The following list, while incomplete, is approximately sorted by the size of exposure.
Biotech is big in the VC start-up arena – so perhaps this is a mere coincidence. But looking at the following list, it is remarkable how many of these are biotech firms and has a relationship with Covid. We highlight the companies that have a direct or a strong tangential link to Covid-related business.
- USDC – Crypto Stablecoin run by Circle – Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.
- ROKU – Roku had 26% of its cash, $487 million, with Silicon Valley Bank
- BLOCKFI – BlockFi has $227 million in “unprotected” funds in Silicon Valley Bank, according to a bankruptcy document, and may be in violation of U.S. bankruptcy law.
- RBLX – Roblox said 5% of its $3b cash and securities balance is held at SVB.
- DNA – Gingko Bioworks: Only the cash balance of the company’s wholly-owned subsidiary Zymergen Inc. is held in deposit accounts at SVB, representing approximately $74M or 6% of the company’s cash and cash equivalents as of December 31, 2022. Covid link?
- RKLB – RocketLab USA had about $38 million in its accounts with the bank, representing about 7.9% of the startup’s cash and equivalents
- LC – Lending Club warned about potentially losing funds on deposit at SVB of $21 million. It said the amount isn’t material to its liquidity position or capital levels and doesn’t pose a risk to the group’s business or operations.
- PAYO – Payoneer: Of the company’s approximately $6.4B in total cash balances as of December 31, 2022, less than $20M is held at SVB
- PTGX – Protagonist Therapeutics considers its exposure to any liquidity concern at SVB to be limited, given that cash held at SVB is approximately $13 million as of March 9, 2023. Covid link?
- ACHR – Archer Aviation entered into a $20 million loan with SVB in 2021, $10 million of which is due for repayment in 2023
- COHU – Cohu announced that it has deposit accounts with SVB with an aggregate balance of approximately $12.3M, which is approximately 3.8% of the company’s total cash and investments.
- IGMS – IMG Biosciences: ‘As of March 10, 2023, the Company holds less than $5.0 million in deposits at SVB. Therefore, the Company believes it does not have any material exposure to any liquidity concerns at SVB.’ Covid link?
- RYTM – Rhythm Pharmaceuticals announced that it has deposit accounts with SVB with an aggregate balance of approximately $3.4 million, which is approximately 1.1% of the Company’s total cash and cash equivalents.’ Covid link?
- SYRS – Syros Pharmaceuticals discloses that, as of March 10, 2023, it has two deposit accounts at Silicon Valley Bank. One of these accounts has a balance of less than $250,000, and the other has a balance of approximately $3.1 million pursuant to a letter of credit that the Company was required to provide to its landlord in connection with the execution of the lease for its corporate headquarters. Covid link?
- EYPT – EyePoint Pharmaceuticals currently maintains a de minimis amount of cash, in the single-digit millions of U.S. dollars, with Silicon Valley Bank (SIVB). Covid link?
- ATRA – Atara Biotherapeutics currently maintains an account at Silicon Valley Bank (“SVB”) holding cash deposits of approximately $2 million, which amount the Company considers to be immaterial to its liquidity.’ Covid link?
- ISEE – Iveric Bio currently maintains a de minimis amount of cash and cash equivalents, in the low single-digit millions of U.S. dollars, with Silicon Valley Bank (“SVe”).’ Covid link?
- VERA – Vera Therapeutics currently holds approximately 1.2% of its cash and investments with SVB. Accordingly, the Company considers its risk exposure relating to SVB to be minimal. Covid link?
- XFOR – X4 Pharmaceuticals had approximately 2.5% of its cash deposits with SVB. Covid link?
- CTMX – CytomX Therapeutics does not consider its exposure to any liquidity concern at SVB to be significant. The cash held at SVB in CytomX’s operating CTMX account is at or near the FDIC-insured limit of $250,000. CytomX also maintains a deposit account at SVB under a standby letter of credit issued pursuant to its office lease for approximately $917,000.’ Covid link?
- AXSM – Axsome Therapeutics has material cash deposits with SVB. Covid link?
- WVE – Wave Life Sciences aggregate amount of the company’s cash and restricted cash held at SVB is approximately $1.5M. Covid link?
- JNPR – Juniper Networks maintains operating accounts at SVB with a minimal cash balance of less than 1% of the company’s total cash
- QS – QuantumScape has very limited exposure to SVB, with only a low single-digit percentage exposure relative to both the Company’s total liquidity and total assets.
So what’s going on here?
- Was SIVB being targeted by bigger banks in an effort to gain market share?
- Was there an attack on Covid-related business start-ups? Whether this may be pro or con toward the Covid public narrative.
- Another theory is that it was another attack on cryptocurrencies by central banks to ready the implementation of their CBDCs. USDC – Crypto Stablecoin, run by Circle, is now under threat of solvency.
- Did SIVB go “woke” and then went broke? Woke head of “risk assessment” at Silicon Valley Bank “prioritized” LGBT initiatives and not watching out for the bank – see here.
- Perhaps it is a mere coincidence, and the banking fragility is systemic and could bring contagion to other banks – or this is a mere one-off.
Which is it? While all the other mainstream media bombshells exploded in the past week, this SIVB failure got a mere mention. In any case, one has to wonder whether this story is over.
By Tom Williams