SVP Financial is down more than 50% as the tech bank raises more cash

  • Trading in the stock was halted due to volatility several times during the session.
  • The company said in a letter from CEO Greg Becker on Wednesday that it had sold a “substantial amount” of available-for-sale securities.
  • SVB’s letter said the bond sale would result in an after-tax loss of $1.8 billion.

In this photo chart of SVB Financial Group’s TradingView stock market chart, the SVB Financial Group logo is shown on a smartphone in the background.

Igor Golovneov | Lightrocket | Good pictures

Shares of technology-focused bank SVB Financial fell more than 50% on Thursday after the company announced plans to raise more than $2 billion in capital to cover losses on bond sales.

Stock trading was halted due to volatility several times during the session, and the fall brought SVB’s market capitalization below $8 billion.

Check out the chart…

SVB Financial fell sharply after announcing plans to raise more cash.

The company reported in A Letter From CEO Greg Becker on Wednesday, he said he had sold “substantially all of the putable securities” and wanted to raise $2.25 billion between common equity and convertible preferred stock.

Investment fund General Atlantic has already pledged to contribute $500 million of that total, according to the letter.

SVB’s letter said the loss of after-tax earnings from the bond sale was $1.8 billion, but the company said its plan to reinvest the proceeds “must be mobilized immediately” as the bank overhauls its balance sheet.

The company reported $28.8 billion in available-for-sale bonds and $95.3 billion in maturing bonds on its balance sheet at the end of December. The securities available for sale were mostly US Treasuries.

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The Federal Reserve has raised interest rates aggressively over the past year, which could cause the value of bonds to fall — especially those that take years to mature. SVB said it will reinvest the proceeds from its sale into short-term assets.

The bank cited higher interest rates and “burning more money from our customers” as reasons for raising new capital. The firm is heavily involved with startups, with SVB saying on its website that nearly half of all venture-backed technology and life sciences companies in the U.S. bank are with it.

In a note to clients, Wells Fargo banking analyst Mike Mayo said SVB’s problems appeared to stem from a “lack of financial diversification.” High interest rates, fears of a recession and a sluggish market for initial public offerings have made it difficult for startups to raise additional capital.

SVB’s dramatic decline comes shortly after cryptocurrency-focused bank Silvergate announced plans to liquidate. SVB said in its letter that it has limited exposure to crypto.

— CNBC’s Michael Bloom contributed to this report.

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