“Government has about 48 hours to fix soon-to-be-irreversible mistake”: Bill Ackman warns some businesses may not be able to meet payroll after SVB failure

Photo of author

,The government has about 48 hours to rectify the irreparable mistake at the earliest. By allowing SVB to fail without protecting all depositors, the world has woken up to what is an uninsured deposit – an unsecured illegal claim on a failed bank. Absent JP Morgan or Citi or Bank of America acquiring SVB before the open on Monday, a possibility I think unlikely, or the government guaranteeing all of SVB’s deposits, that huge sucking sound you’ll hear, That would be the withdrawal of substantially all uninsured deposits, except in ‘systemically important banks’ (SIBs).,

– Bill Ackman, CEO Pershing Square Capital Management

The collapse of a Silicon Valley bank on has left some start-up businesses scrambling to pay employees and wondering whether they will be forced to lay off workers if funds held by the bank are frozen or lost. Will be done.

Big companies such as connected TV provider Roku and video game maker Roblox warned investors that hundreds of millions of cash they held with a Silicon Valley bank could be at risk.

LookRoku says it has ‘no idea’ how much cash it will be able to recover from SVB

“Already thousands of the fastest growing, most innovative venture-backed companies in America will begin failing to make next week,” Ackman said in a loanYes do on Saturday.

Silicon Valley Bank had relationships with more than half of the venture-backed companies in the United States, according to its website. If the bank doesn’t have a quick rescue, the consequences could be dire for many start-ups and the wider tech landscape, said Gary Tan, chief executive of Y Combinator, one of the most important Silicon Valley start-up incubators.

See also  Inventory Marketplace These days: Dow Features 100 Issues on Key Inflation Knowledge; Tesla Inventory Rallies

LookSilicon Valley bank failure an extinction-level event for startups, says Y Combinator’s Gary Tan

While the Federal Deposit Insurance Corporation (FDIC) took over the bank, which is known for lending to start-ups but also offers mortgage and other services like Private Banking, deposits are only insured up to $250,000. it occurs. The bank’s total assets exceeded $200 billion. About $ 42 billion was withdrawn from the bank on Thursday alone. According to the California Department of Financial Protection and Innovation,

The Silicon Valley bank was shut down by the California Department of Protection and Innovation and the Federal Deposit Insurance Corporation (FDIC) on and a receivership was appointed. The bank became the first FDIC-backed institution to fail this year.

LookSilicon Valley bank branches shut down by regulator in biggest bank failure since Washington Mutual

The FDIC said the Silicon Valley bank had about $209 billion in total assets and about $175.4 billion in total deposits as of the end of December, but it was unclear how much is now on the bank’s balance sheet. The FDIC said deposit holders would be able to withdraw up to $250,000 on Monday. For those depositing more than this, it provides a hotline number to call.

Ekman said, “My back-of-the-envelope review of SVB’s balance sheet shows that even in a liquidation, depositors should eventually get back about 98% of their deposits, but that ultimately is too long when You have your parole due next week.” “So even without assigning any franchise value to the SVB, the cost of the government’s guarantee of the SVB deposits would be minimal.”

See also  At Marc Benioff's Salesforce, It's One Big Family—Until Trouble Comes

As look for a buyer for the remnants of SVB Group, they will work to find a buyer for SVB’s commercial-banking operations, a wealth unit, an investment bank and a manager. Bloomberg reported Saturday.

Still, the FDIC statement on did not indicate a possible quick sale of the entire firm. The regulator said it will issue an advance dividend to uninsured depositors within the next week along with future payments, probably coming in the form of asset sales.