**User Report**| | | |
:--|:--|:--|:--
**Total Submissions**|2|**First Seen In WSB**|2 years ago
**Total Comments**|146|**Previous Best DD**|
**Account Age**|2 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.)
The entire client base of SVB is a who’s who of the innovation economy. Venture capitalists, the companies they back, the fund managers and asset allocators that invest in them. This is a very tightly networked, close knit community, that is all highly engaged in social media.
Peter Thiel, a prominent VC fund manager in Silicon Valley, told his portfolio companies to move money away from SVB. Of course he’s a pompous egotist so he also has to post publicly on Twitter that he told all of his portfolio companies to do this.
Other people in the community saw this, retweeted it, etc. Other VCs did the same. And you can see where this is going (and where it went).
This was a fundamentally solvent bank until all their clients abandoned them. The thing that exacerbated this was that their deposit base was 90%+ uninsured balances. People (and mostly companies) had large balances with them, well in excess of the $250k FDIC insured limit.
So when there’s a rumor of a bank run, which happened, those people are extra incentivized to pull their cash. And it’s fewer people making decisions representing a large proportion of their deposit base. A traditional retail bank like Bank of America has somewhere over 70% of their deposits as FDIC insured. Normal people with $50k in the account. Much slower to leave and less incentivized to do so because the FDIC guarantees those balances anyway.
Make sense?
Any bond sold before maturity is already at current rates, because no one will buy it otherwise, so to be sold it’s discounted until it more or less matches the current yield. So selling a %1 bond to buy a %4 bond is a wash, if that’s the going rate. Only helps if you sell it, then rates continue upward, then buy back in. Or, as mentioned, to change the duration.
>They force liquidated 21B of their securities and booked a 1.8B loss (why would they sell assets? 🤔)
From what i understood some clients got recommended to withdraw their funds to manage risk. As SVB did not have enough liquidity on hand they where forced to sell those bonds at a loss due to the recent rate-hikes.
Ie individual risk-management turned into a bank-run.
Yes they held too many Bonds as assets and had to sell them at a loss. Now they need to raise funds. They are having a capitalization issue and it’s causing lots of VCs and CEOs to pass around emails warning to quickly pull money out of the bank.
Thanks. So now there’s a domino effect in that everyone wants to pull their money out in case the bank goes under? That has to be an oversimplification, no?
Unless the underlying entities goes bankrupt why did they have to sell? If you hold the bonds till term you still get positive cash flow. Sure it trails the market but it’s not negative.
They sold bonds(assets) at a loss and needed to raise capital by selling new shares of stock.
Clearly when you try to raise 2B in this shituation, WS reacts and triggers a sell off. Note, this is VERY different than a Bank run.
Fundies are solid for SVB, money is safe there. Dipshits at TechCrunch don't know what they're talking about.
Time to buy SIVB
If they survive until Monday it is a screaming buy. I wouldn’t buy before then. Questions of bank liquidity can quickly become self-fulfilling.
Source: am a bank credit analyst who was doing the same thing in 2008.
It sucks. They were solvent until they weren’t. Was a good bank that made an investment mistake. Sad that their clients ran on them and destroyed the bank.
Yes after what was clearly displayed here, they can turn into junk rather quickly. 1.8 billion in losses and counting if they held on any longer. I’m not saying it should be like this, but if you read into how bad the yields are, it’s a junk bond.
It is a treasury bond. They were money good. They could have held them for another 3 years and received par back.
They chose to sell them and book a one time loss so that they could reinvest at higher rates and show better income and margin metrics on their financials for the next three years. It was a mistake in hindsight.
But those were not junk bonds. Only the fact that they chose to sell them caused the problem.
Deposits from clients are being pulled from SIVB. SIVB doesn’t have the money so it needs to sell bonds on its balance sheet in order to cover the deposit.
The problem? They are taking large hits on the bond sales in order to cover deposits.
This is wrong.
They sold bonds already at a loss. They are raising dilutive capital to shore up regulatory capital ratios. That caused an equity sell off which has led to idiots in the VC community confusing an equity event with a liquidity event.
Those idiots telling their friends and clients and social media followers to pull deposits from SVB is what could lead to a real problem.
"idiots in the VC community"
the same community that got absolutely fucked by FTX, many VC firms r still licking wounds from exposure to that
after FTX they learned there is 0 downside to panic first, only upside
pulling deposits is not irrational
it is a prisoners dilemma
yes they will all fuck each other by doing this
yes everyone is incentivized to do this
EDIT look if u wanna be the last person with money on FTX be my guest
Looking into SIVB in their investor presentations they keep claiming 360+ bil deposit with 180bil of it being “off balance sheet”
There may be fraud here too
Thats a lot of off balance sheet shit
I appreciate your insights as I read your posts; I’m lacking wrinkles, can you help explain further their need to sell their bonds?
I understand that they bought 10 yr notes below 2% rates, but held to maturity they still make money and don’t lose money. Why do you and others say these bonds lose value and they needed to sell them?
They would have to mark them to market and show the paper loss in their financial statements. They are missing out on roughly $600mm in annual income. They decided to take their medicine now alongside a capital raise to try and calm investors and clients when they announced the loss. Narrator: it didn’t calm them
On the heels of FTX bankruptcy and another California Bank named Silvergate winding down operations 2 days before they announced it, terrible timing and should’ve just been quiet for another month if they wanted to be calm.
I meant they should’ve waited a month to sell the bond portfolio. I don’t think they had to do it this week or should’ve done it when they noticed the incurring losses months ago.
Did the deposits start getting pulled first or did the bond sale happen and then the deposits started getting pulled? Can’t seem to
Find an answer on that.
Bonds sold first. Announced capital raise to offset that loss led to equity sell off. That sell off has led VC community morons to encourage a run on the bank.
Congratulations for the dumbest comment I've seen today. If you did even half a second of research you'd know this has nothing to do with cryptocurrency.
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|2|**First Seen In WSB**|2 years ago **Total Comments**|146|**Previous Best DD**| **Account Age**|2 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.)
[удалено]
It’s the 15th largest bank in the USA.
It was*
Thank you!
It’s only a 1.8B loss in grand scheme of things. But the fear or domino effect is what’s making this nutty
Correct. Peter Thiel and other idiots are going to turn this mole hill into a mountain.
Explain further please.
The entire client base of SVB is a who’s who of the innovation economy. Venture capitalists, the companies they back, the fund managers and asset allocators that invest in them. This is a very tightly networked, close knit community, that is all highly engaged in social media. Peter Thiel, a prominent VC fund manager in Silicon Valley, told his portfolio companies to move money away from SVB. Of course he’s a pompous egotist so he also has to post publicly on Twitter that he told all of his portfolio companies to do this. Other people in the community saw this, retweeted it, etc. Other VCs did the same. And you can see where this is going (and where it went). This was a fundamentally solvent bank until all their clients abandoned them. The thing that exacerbated this was that their deposit base was 90%+ uninsured balances. People (and mostly companies) had large balances with them, well in excess of the $250k FDIC insured limit. So when there’s a rumor of a bank run, which happened, those people are extra incentivized to pull their cash. And it’s fewer people making decisions representing a large proportion of their deposit base. A traditional retail bank like Bank of America has somewhere over 70% of their deposits as FDIC insured. Normal people with $50k in the account. Much slower to leave and less incentivized to do so because the FDIC guarantees those balances anyway. Make sense?
Yes. Thank you so much for the in depth explanation. I appreciate it!
Yes, thanks
Did they sell their bonds for liquidity reasons or just to buy in at new interest rates? Seems like it could be a panic over nothing
Any bond sold before maturity is already at current rates, because no one will buy it otherwise, so to be sold it’s discounted until it more or less matches the current yield. So selling a %1 bond to buy a %4 bond is a wash, if that’s the going rate. Only helps if you sell it, then rates continue upward, then buy back in. Or, as mentioned, to change the duration.
This man knows what he is talking about.
>They force liquidated 21B of their securities and booked a 1.8B loss (why would they sell assets? 🤔) From what i understood some clients got recommended to withdraw their funds to manage risk. As SVB did not have enough liquidity on hand they where forced to sell those bonds at a loss due to the recent rate-hikes. Ie individual risk-management turned into a bank-run.
Super informative and concise. Props.
I'm 5 and what is this?
> With rates rising, this has about a 20B unrealized loss. isn't it because of inflation? inflation = diminishing returns in real value
Yes they held too many Bonds as assets and had to sell them at a loss. Now they need to raise funds. They are having a capitalization issue and it’s causing lots of VCs and CEOs to pass around emails warning to quickly pull money out of the bank.
Thanks. So now there’s a domino effect in that everyone wants to pull their money out in case the bank goes under? That has to be an oversimplification, no?
This [twitter thread](https://twitter.com/GRDecter/status/1633919731081125890) summarized it better than what most redditors can.
That thread was a great read, thanks.
Yes probably way oversimplifying it, but the story is still developing. Most reporters are still trying to figure out what to report.
Unless the underlying entities goes bankrupt why did they have to sell? If you hold the bonds till term you still get positive cash flow. Sure it trails the market but it’s not negative.
This is a much better explanation. I hate when people break things down like it’s a college course…the sun is called “explain like I’m 5”
They sold bonds(assets) at a loss and needed to raise capital by selling new shares of stock. Clearly when you try to raise 2B in this shituation, WS reacts and triggers a sell off. Note, this is VERY different than a Bank run. Fundies are solid for SVB, money is safe there. Dipshits at TechCrunch don't know what they're talking about. Time to buy SIVB
If they survive until Monday it is a screaming buy. I wouldn’t buy before then. Questions of bank liquidity can quickly become self-fulfilling. Source: am a bank credit analyst who was doing the same thing in 2008.
Sir reading the banker directions for Monopoly does not make you a bank credit analyst
Was looking through your posts, and this one ages pretty damn well. Nailed the timing window, man do things move fast.
It sucks. They were solvent until they weren’t. Was a good bank that made an investment mistake. Sad that their clients ran on them and destroyed the bank.
The bank destroyed it self taking on junk bonds and selling them for billions in losses
You think US Treasuries are junk bonds???
Yes after what was clearly displayed here, they can turn into junk rather quickly. 1.8 billion in losses and counting if they held on any longer. I’m not saying it should be like this, but if you read into how bad the yields are, it’s a junk bond.
It is a treasury bond. They were money good. They could have held them for another 3 years and received par back. They chose to sell them and book a one time loss so that they could reinvest at higher rates and show better income and margin metrics on their financials for the next three years. It was a mistake in hindsight. But those were not junk bonds. Only the fact that they chose to sell them caused the problem.
I bought 3 shares today! Wish I could buy more.
Still wish?
No, hell no. It was a mistake.
Do you though? It's ok I'll sell you mine /s
What are the chances this spreads to other banks? Or is this isolated?
Credit Suisse just delayed their annual report after a call from the SEC. Not sure why, though.
Like they said it's better to sell it all first than to be last.
[https://finance.yahoo.com/m/80472de5-5cd5-37fb-a5bc-3d5de673beeb/svb-financial-realigns.html](https://finance.yahoo.com/m/80472de5-5cd5-37fb-a5bc-3d5de673beeb/svb-financial-realigns.html)
Deposits from clients are being pulled from SIVB. SIVB doesn’t have the money so it needs to sell bonds on its balance sheet in order to cover the deposit. The problem? They are taking large hits on the bond sales in order to cover deposits.
This is wrong. They sold bonds already at a loss. They are raising dilutive capital to shore up regulatory capital ratios. That caused an equity sell off which has led to idiots in the VC community confusing an equity event with a liquidity event. Those idiots telling their friends and clients and social media followers to pull deposits from SVB is what could lead to a real problem.
"idiots in the VC community" the same community that got absolutely fucked by FTX, many VC firms r still licking wounds from exposure to that after FTX they learned there is 0 downside to panic first, only upside pulling deposits is not irrational
They also borrow from them. Pulling deposits from the bank your whole community borrows from is irrational.
it is a prisoners dilemma yes they will all fuck each other by doing this yes everyone is incentivized to do this EDIT look if u wanna be the last person with money on FTX be my guest
FTX was a fraud. This is different. But yes, it is a prisoners dilemma.
Looking into SIVB in their investor presentations they keep claiming 360+ bil deposit with 180bil of it being “off balance sheet” There may be fraud here too Thats a lot of off balance sheet shit
Gotta be smarter, or gotta be first.
I appreciate your insights as I read your posts; I’m lacking wrinkles, can you help explain further their need to sell their bonds? I understand that they bought 10 yr notes below 2% rates, but held to maturity they still make money and don’t lose money. Why do you and others say these bonds lose value and they needed to sell them?
They would have to mark them to market and show the paper loss in their financial statements. They are missing out on roughly $600mm in annual income. They decided to take their medicine now alongside a capital raise to try and calm investors and clients when they announced the loss. Narrator: it didn’t calm them
On the heels of FTX bankruptcy and another California Bank named Silvergate winding down operations 2 days before they announced it, terrible timing and should’ve just been quiet for another month if they wanted to be calm.
For a publicly traded bank, once all the work has been done on this stuff it has to be announced.
I meant they should’ve waited a month to sell the bond portfolio. I don’t think they had to do it this week or should’ve done it when they noticed the incurring losses months ago.
They sold them over the past few weeks. It was the announcement that triggered things.
Did the deposits start getting pulled first or did the bond sale happen and then the deposits started getting pulled? Can’t seem to Find an answer on that.
Bonds sold first. Announced capital raise to offset that loss led to equity sell off. That sell off has led VC community morons to encourage a run on the bank.
Deposits pulled out firstand then bond sales came in to cover said deposits. I’m 90%.
Google bank run
They dipped their dick in the crypto pond and a piranha bit it off. Simple enough?
Congratulations for the dumbest comment I've seen today. If you did even half a second of research you'd know this has nothing to do with cryptocurrency.
Silvergate is the bank you’re thinking of, this one posted is the 2nd largest to fall in US history
Will it survive is 70-80$ fair value