How SVB failed?

[Spartan]

4 minutes ago, JaiBalayyaaa said:

You mean someone born in South Africa?

Fed group, Dem/Rep group, Alliance of politicians, or Investment bankers...

[dasari4kntr]

11 minutes ago, Spartan said:

  edo gooduputani undi..

 

behind the scene manak teliyadam le..

someone big wanted it to collapse .... to trigger the banking collapse

and make money other way around.

na doubt …SPAC ani…

i need to research more about it…

[Spartan]

2 minutes ago, dasari4kntr said:

na doubt …SPAC ani…

i need to research more about it…

yup ayi undochu.

[Balibabu]

uhu

[dasari4kntr]

some new revelations …

 

How Goldman’s Plan to Shore Up Silicon Valley Bank Crumbled

 

Sil­i­con Val­ley Bank ex­ec­u­tives went to Gold­man Sachs Group Inc. in late Feb­ruary look­ing for ad­vice: They needed to raise money but weren’t ex­actly sure how to do it.

Soar­ing in­ter­est rates had taken a heavy toll on the bank. De­posits and the value of the bank’s bond port­fo­lio had fallen sharply. Moody’s In­vestors Ser­vice was pre­paring for a down­grade. The bank had to re­set its fi­nances to avoid a fund­ing squeeze that would badly dent prof­its.

The con­ver­sa­tions—held over the course of about 10 days—cul­mi­nated in a March 8 an­nounce­ment of a nearly $2 bil­lion loss and a planned stock sale that badly spooked in­vestors. SVB Fi­nan­cial Group shares tanked the next morn­ing. Startup and ven­ture-cap­i­tal cus­tomers with big unin­sured bal­ances pan­icked, at­tempt­ing to pull $42 bil­lion out of the bank in a sin­gle day.

While few could have pre­dicted the mar­ket’s vi­o­lent re­ac­tion to the SVB dis­clo­sures, Gold­man’s plan for the bank had a fa­tal flaw. It un­der­es­ti­mated the dan­ger that a del­uge of bad news could spark a cri­sis of con­fi­dence, a de­vel­op­ment that can quickly fell a bank.

Gold­man is the go-to ad­viser to the rich and the pow­er­ful. It arranges merg­ers, helps com­pa­nies raise money and de­vises cre­ative so­lu­tions to sticky sit­u­a­tions of the fi­nan­cial va­ri­ety—a tal­ent that has made the firm bil­lions.

Yet, for SVB, Gold­man’s gold-plated ad­vice came at the steep­est pos­si­ble cost. SVB col­lapsed at warp speed in the sec­ond-largest bank fail­ure in U.S. his­tory, set­ting off a trans-At­lantic bank­ing cri­sis that reg­u­la­tors are work­ing fu­ri­ously to con­tain.

This ac­count of SVB’s last days is based on in­ter­views with bankers, lawyers and in­vestors who al­most par­tic­i­pated in the doomed deal.

….…

 ….…

 …..

SVB ex­ec­u­tives came to Gold­man with the rough out­lines of a plan to raise cap­i­tal. Two pri­vate-eq­uity firms, Gen­eral At­lantic and War­burg Pin­cus LLC, were on the bank’s list of pos­si­ble in­vestors.

The ex­ec­u­tives wanted to do a pri­vate stock place­ment—a deal in which they would qui­etly line up in­vestors to buy a set num­ber of shares at a set price—and they wanted to do it fast. Moody’s was pre­paring to down­grade the bank, a move the ex­ec­u­tives feared would alarm in­vestors.

Bankers in Gold­man’s eq­uity-cap­i­tal mar­kets busi­ness, led by David Lud­wig, and its fi­nan­cial in­sti­tu­tions group, run by Pete Lyon, be­gan piec­ing to­gether a share sale dur­ing the first week of March and ap­proached the two pri­vate-eq­uity firms.

Gold­man pitched a hy­brid pub­lic-pri­vate share sale: The firm would find enough in­vestors to fully fund a $2.25 bil­lion deal but would also of­fer the pub­lic an op­por­tu­nity to buy shares at the same price.

By March 5, War­burg had dropped out. It needed more time to eval­u­ate the deal than SVB was will­ing to give, and it didn’t want to par­tic­i­pate in an of­fer­ing with a pub­lic com­po­nent.

On Gold­man’s trad­ing desk, an­other deal was com­ing to­gether. SVB was seek­ing a buyer for its $21 bil­lion port­fo­lio of avail­able-for-sale debt se­cu­ri­ties. The buyer would be Gold­man.

Gen­eral At­lantic, mean­while, agreed to pony up $500 mil­lion in the stock sale. But time was run­ning out to line up more in­vestors to sup­ply the re­main­ing $1.75 bil­lion that SVB was look­ing to raise. SVB ex­ec­u­tives weren’t ready to give in­vestors the in­for­ma­tion they needed to get every­one on board.

Gold­man de­cided the only op­tion was a pub­lic share of­fer­ing an­chored by Gen­eral At­lantic. SVB ex­ec­u­tives signed off on the plan.

Mr. Lud­wig and oth­ers at Gold­man thought SVB had to move quickly. The Moody’s down­grade was com­ing, and then the bank would close for the week­end. Bet­ter to get all the bad news out of the way to avoid a Mon­day melt­down.

On March 8, Gold­man com­pleted the pur­chase of the SVB se­cu­ri­ties port­fo­lio at a dis­count to its mar­ket value. Af­ter the mar­ket closed, SVB an­nounced that it had re­al­ized a $1.8 bil­lion loss on the sale, with­out dis­clos­ing the buyer, and said it would sell shares to raise cap­i­tal.

By that point, SVB’s man­age­ment team was al­ready brac­ing for the bad news. Just be­fore the bank launched its doomed share sale, it hired deal the ad­vi­sory firm Cen­ter­view Part­ners to ex­plore a plan B.

Gold­man bankers were still con­fi­dent that the share sale would come to­gether. SVB’s stock at first fell around 8% in af­ter­mar­ket hours, not as steep a drop as feared, and Gold­man’s bankers re­ceived many or­ders to buy shares.

The mood shifted less than an hour later when an­other bank, Sil­ver­gate Cap­i­tal Corp., an­nounced it was shut­ting down fol­low­ing a run that drained its de­posits. A one-notch Moody’s down­grade, less se­vere than SVB ex­ec­u­tives feared, landed at around 8 p.m.

SVB shares tanked when the mar­ket opened on March 9, prompt­ing cus­tomers to pull their de­posits. It was the be­gin­ning of a down­ward spi­ral: As news of the de­posit run spread, the shares fell fur­ther, prompt­ing more cus­tomers to yank their money. The stock closed down more than 60%.

Still, the deal wasn’t dead yet. Gold­man had lined up a slate of in­vestors at $95 a share, about $11 less than the day’s clos­ing price.

At around 5 p.m., Gold­man bankers got a re­port on SVB’s de­posit out­flows.

The bank’s lawyers at Sul­li­van & Cromwell LLP said the deal couldn’t go for­ward with­out a dis­clo­sure about the de­posit losses. Gold­man aban­doned the deal. The Fed­eral De­posit In­sur­ance Corp. seized SVB be­fore it could open the next morn­ing.

 

[dasari4kntr]

5 hours ago, Ryzen_renoir said:

This narrative is terrible because silicon valley bank actually passes all the stress tests of the original dodd Frank law 

The only reason they are bringing up this argument is to blame Trump for the bank failure , it's just pure politics 

Once again there's nothing fundamentally wrong about SVB aside from some bad bets , it's just that they had a huge bank run in a short period of time

 

 

 

4 hours ago, Ryzen_renoir said:

I agree , There is definitely mismanagement in SVB but nothing that would make it crash so fast 

It's not just regulation , it's just bad management