Banking & FinanceIndustry

Silicon Valley Bank’s $1.75 Billion Capital Raise to Recover from $1.8 Billion Loss Incurred from Securities Portfolio Sale Causes Stock Market Panic

Silicon Valley Bank, a well-known lender for startups and tech firms in the US, suffered a significant setback on Thursday as its stock prices plummeted by 60%. The bank had launched a $1.75 billion capital raise to make up for the $1.8 billion loss resulting from the mandatory sale of its securities portfolio. The bank’s decision to raise funds was aimed at reassuring investors and venture capital clients about the safety of their investments. Silicon Valley Bank’s strategy is to strengthen its financial position to overcome the decline in deposits from startups that are finding it difficult to raise capital amid a funding drought.

Despite the bank’s efforts to restore investor confidence, the large-scale fundraising effort has unsettled shareholders and clients. According to reports, Silicon Valley Bank CEO Greg Becker called clients himself to persuade them to keep their investments with the bank and assure them about the safety of their funds. The decision of many founders and startups to withdraw money from their deposits as a precautionary measure has been a cause of concern. The ongoing efforts of the US Federal Reserve to raise interest rates to curb core inflation have also impacted VC funding, causing startups to look for cash as valuations fall. The combined effect of Silicon Valley Bank’s decline and other major US banking shares resulted in over $80 billion in stock market value disappearing from the 18 banks in the S&P 500 banks index.

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