Warning signs emerged in 2019 when deposits grew faster than loan book
Fast forward to last week & Moody warns a major downgrade
$SIVB were burning through cash causing stock price to tumble so they began pulling back on investment. This plan backfired as lenders took over.
A lack of customer diversity and poor investment decisions including investments in Mortgage backed securities compounded the problem.
This bring us to Feb 27 where the CEO and the CFO sold a large propitiation of their shares in SIVB.
In the middle of last week, Moody’s informed Silicon Valley Bank they are preparing to downgrade their credit.
The reason was the value of SIVB bonds fell due to high interest rates.
SVB then began their consultation with Goldman Sachs. Based on this meeting the plan was to sell $20b of stocks & reinvest in assets.
This would cause a loss so they planned to counter by selling shares.
But their plan to sell shares backfired as their clients were scared & began withdrawing funds. This caused the collapse.
To counter this problem, SVB managed to get General Atlantic to buy $500m of the $2.25bn stock. Other investors were unable to reach a deal for the remaining stock due to timeline restrictions.
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