SVB FinancialSilicon Valley Bank’s parent company, couldn’t find a buyer before a bank run caused regulators to shut it down.
Sources previously told CNBC’s David Faber that deposit outflows were outpacing the sales process, making it very difficult for potential buyers to make a realistic assessment of the bank.
SVB tried to find a buyer and hired advisers to do so after the bank’s attempts to raise capital failed, the sources told Faber.
Shares of the bank fell 60% on Thursday after SVB announced a plan to raise more than $2 billion in capital on Wednesday night. The stock fell another 60% in premarket trading on Friday before being shut down. The shares never reopened for trading on Friday.
Under the conditions of a plan released Wednesday, SVB was seeking $1.25 billion in common stock and an additional $500 million in convertible preferred stock.
SVB also announced a deal with investment firm General Atlantic to sell $500 million of common stock, though that deal was contingent on the closing of the other common stock offering, according to a deposit securities.
SVB is a major bank for venture-backed companies and cited client cash burn as one of the reasons it was looking for additional capital.
However, rising interest rates, recession fears and a slowdown in the IPO market have made it more difficult for start-up companies to raise more money. This apparently led to the companies using their balances with banks such as the SVB.
Wall Street analysts said Thursday and Friday that the problems at SVB were unlikely to spread widely across the banking system. Morgan Stanley said in a note to clients that SVB’s issues were “very idiosyncratic.”
Also on Wednesday, SVB announced it has sold $21 billion worth of securities to raise cash and reposition its balance sheet toward shorter-term assets, which are less exposed to rising interest rates. SVB estimated it had lost $1.8 billion on that sale.
