TL;DR
Regulators shut down Silicon Valley Bank (NYSE: SIVB) in the second largest US bank failure in history. The bank held $209 billion in customer deposits, making it the 16th largest bank in the US. Nasdaq halted trading on the stock and most analysts expect the equity to be worth zero. The stock dropped from $267 on Thursday to $39.38 in extended hours trading Friday.
94% of the company’s deposits are not FDIC-insured, meaning that the FDIC is not expected to step in and make customers whole. This means there is a chance these companies can lose some or all of this cash, or potentially wait a very long time to get it back.
Some of the notable publicly-traded companies caught in the Silicon Valley Bank mess
- Roblox (NYSE: RBLX) holds about $150 million, or 5% of the company’s cash balance at the bank
- Roku (NASDAQ: ROKU) holds about $487 million or 26% of the company’s cash balance at the bank
- LendingClub (NYSE: LC) holds about $21 million, or about 2% of its cash balance at the bank
- iRhythm Technologies (NASDAQ: IRTC) holds about $55 million, or 26% of its cash balance at the bank.
Silicon Valley Customers List: Full List of Stocks
| Company Name | Ticker | Cash in SVB | % of Cash in SVB | SEC Filing Link |
|---|---|---|---|---|
| Roblox | RBLX | $150m | 5% | SEC Filing |
| Roku | ROKU | $487m | 26% | SEC Filing |
| Gingko Bioworks | DNA | $74m | 6% | SEC Filing |
| iRhythm Technologies | IRTC | $55m | 26% | SEC Filing |
| Sangamo Therapeutics | SGMO | $34m | 11% | SEC Filing |
| LendingClub | LC | $21m | 2% | SEC Filing |
| Rocket Lab | RKLB | $38m | 8% | SEC Filing |
| Oncorus | ONCR | $10m | 23% | SEC Filing |
| Ambarella | AMBA | $17m | 12% | SEC Filing |
| SEP Acquisition | SEPA | $1.2m | 100% of operating cash, 0% of trust |
SEC Filing |
| Protagonist Therapeutics | PTGX | $13m | 6% | SEC Filing |
| QuantumScape | QS | $2-$5m | 1-2% | SEC Filing |
| Juniper Networks | JNPR | <1% | SEC Filing | |
| Vimeo | VMEO | <$0.25m | <1% | SEC Filing |
| Quotient Technology | QUOT | $0.4m | <1% | SEC Filing |
| Generation Bio | GBIO | $3-$7m | 4-8% | SEC Filing |
| IGMS Biosciences | IGMS | <$5m | <3% | SEC Filing |
| Novanta | NOVT | 0.4m | <1% | SEC Filing |
| x4 Pharmaceuticals | XFOR | $2.3m | 2.5% | SEC Filing |
| aTYR Pharmaceuticals | LIFE | <$1.5m | <2% | SEC Filing |
| Cohu | COHU | $12m | 4% | SEC Filing |
| Compugen | CGEN | <$1m | 1% | SEC Filing |
| Eiger Biopharma | EIGR | $8m | 7% | SEC Filing |
| iTeos Therapeutics | ITEO | $7.5m | 1% | SEC Filing |
| Shattuck Labs | STTK | $2m | <1% | SEC Filing |
| Landos Pharmaceuticals | LABP | $2-$5m | 10-15% | SEC Filing |
| Payoneer | PAYO | <$20m | ~3% | SEC Filing |
| Praxis Precision | PRAX | <$20m | <20% | SEC Filing |
| Neuctronics | STIM | <$1m | <1% | SEC Filing |
| Mirum Pharmaceuticals | MIRM | <$2m | <2% | SEC Filing |
| Kymera Pharmaceuticals | KYRM | $2.2m | <1% | SEC Filing |
| Rapt Pharmaceuticals | RAPT | $2m | 1% | SEC Filing |
| scPharmaceuticals | SCPH | $0.25m | <1% | SEC Filing |
| Repare Therapeutics | RPTX | <$7m | <2% | SEC Filing |
| Treace Medical | TMCI | <$10m | <10% | SEC Filing |
| Enanta Pharma | ENTA | <$12m | <5% | SEC Filing |
| io Biotech | IOBT | <$1.5m | <1% | SEC Filing |
| Atara Pharma | ATRA | <$2m | <1% | SEC Filing |
| GlycoMimetics | GLYC | $2m | ~4% | SEC Filing |
| Viridian Therapeutics | VRDN | $2-$5m | ~1% | SEC Filing |
| IVERIC bio | ISEE | $2-$5m | <1% | SEC Filing |
| Gelecto | GLTO | $1.5m | 2.5% | SEC Filing |
| Wave Life Sciences | WVE | $1.5m | 1% | SEC Filing |
| Vera Therapeutics | VERA | $1.5m | 1.2% | SEC Filing |
| Syros Pharma | SYRS | $3.1m | 1.5% | SEC Filing |
| Axsome Therapeutics | AXSM | Unclear | Unclear | SEC Filing |
Additionally, there’s a number of companies that haven’t confirmed or denied a relationship with the bank, but are suspected to have some assets at the bank for one reason or another.
How Did Silicon Valley Bank Fail?
Let’s think about the business of a bank first. There’s a classic saying in banking — 3/6/3: borrow money at 3%, lend it at 6%, and be on the golf course by 3 pm. This is an outdated model of how modern banking works, but its illustrative of the core of banking.
Banks borrow short-term money at low rates and lend it out for longer durations at higher rates. The spread between the interest paid on the short-term loans and that received from long-term loans is a bank’s margin.
Finance guys call this concept the net interest margin. It’s basically a measure of how good a bank is at borrowing for cheap and lending at high rates.
This brings us to the idea of a yield curve. Traditional financial theory says that longer-term debt should carry a higher interest rate than shorter-dated debt. Obviously, the longer-term the debt, the higher the risk of nonpayment, inflation, or a change in interest rates is.
To visualize this, we can look at a chart of a yield curve, which just tells you the interest rate for different loan durations. To keep things simple, we’ll use the US Treasury yield curve, which shows the different interest rates offered by different durations of US government bonds.
For instance, below is the US Treasury yield curve in 2005. Makes logical sense, right? The longer the loan, the higher your interest rate will be.
Fast forward to today. Inflation forced the Federal Reserve to hike interest rates. But something interesting happened. Short-term US government bond yields went higher than long-term government bond yields.
In other words, you get a higher interest rate for investing in a shorter-term bond. Intuitively, this doesn’t make a lot of sense. But think about it. If long-term bond yields are lower than short-term yields, maybe the market is telling you something. Maybe bond traders think that in the long-term, interest rates will go back down and only stay at today’s elevated rates in the short-term.
This concept is called yield curve inversion. And all you need to know is that it’s pretty bad for banks. After all, we know that banks make profits by borrowing cheap short-term debt and lending it out long-term for higher interest rates. When the yield curve inverts, short-term debt actually becomes more expensive, making running a bank very difficult.
This brings us back to Silicon Valley Bank. The company was essentially “short” (like short selling a stock) short-term yields, because they were making aggressive short-term loans to startup companies in the Silicon Valley area. In the meantime, they were investing cash they didn’t loan out in long-dated bonds.
But there’s plenty of banks out there that don’t look like they’re on the brink of collapse. Why did this only kill them?
There’s two more primary reasons for the company’s failure.
The first is the company was too aggressive in its lending practices. Banks, at their core, are risk managers. If a bank offers you a 10% interest rate, they think, to simplify, that your annual likelihood of defaulting is lower than 10%. They view it as a good bet. Good bankers try to make loans at a higher rate than a perfectly efficient market would dictate.
Silicon Valley Bank did the opposite. They offered high-risk startups in the tech and biotech spaces tons of loans at interest rates that were simply too low to compensate the bank for the risk they were taking. As many expected, plenty of SVB’s customers defaulted as economic conditions tightened.
But the thing that really kicked the whole bank run off was SVB selling its bonds at a loss. It was a signal to the market that the SVB strategy has failing big time. So depositors took their money out of the bank in fear. Others followed until it gained enough momentum to start an actual run on the bank.
from Growth Trader https://growthtrader.io/silicon-valley-bank-customers-list-heres-who-is-exposed/
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