SVB’s stranded deposits spread pain from tech to Napa Valley

Photo of author

(Bloomberg) — The ripple effects of one of the largest U.S. bank runs in more than a decade are reaching a wide variety of businesses, as companies from startups to vineyard owners raise the alarm.

Read the most from Bloomberg

Silicon Valley Bank, once the of the California financial system, fell sharply on Friday, a day after investors and depositors tried to make $42 billion in withdrawals. Roku Inc., LendingClub Corp. and Eiger BioPharmaceuticals Inc. They are among dozens of companies that disclosed that their deposits were stuck in the bank.

The stranded funds show that SVB’s troubles are spreading throughout the Silicon Valley ecosystem and pose a risk to the economy at large. Former Treasury Secretary Lawrence Summers warned that there would be “serious” consequences if regulators did not make a smooth transition for the Silicon Valley bank.

In a Bloomberg television interview, Summers said, “Certainly for Silicon Valley — and for the entire venture sector economy, which has been dynamic — there are going to be very significant consequences — unless the government is able to assure that that this situation is worked through.” ,

SVB Financial Group, the bank’s parent, is renowned for its links to startups and well-established technology companies in the Golden State and beyond — many of which provided millions in deposits. The US Federal Deposit Insurance Corporation insures deposits up to $250,000. More than 93% of SVB’s domestic deposits were uninsured at the end of last year, the bank said in a filing.

The streaming technology company said in a Friday filing that about 26% of Roku’s cash and cash equivalents are held by SVB, or about $487 million. SoFi said it has a $40 million lending facility through SVB that is “unaffected” by the FDIC’s foreclosure.

See also  CarTrade Tech To Debut On The Bourses Tomorrow

SVB has Eager deposits of approximately $8.3 million. And beyond Silicon Valley, even Northern California wineries were feeling the pain. With locations in the vineyard regions of Napa and St. Helena, the bank has been a major lender to the industry.

Shares of Rocket Lab USA Inc fell after the launch provider said it had deposits with a Silicon Valley bank. The company has about $38 million in its account, or about 7.9% of the startup’s cash and equivalents, it said in a filing Friday.

In contrast, SoftBank Group Corp-backed insurance fintech Lemonade Inc said it had less than $7,000 in cash in the bank.

Representative Anna Eshoo, a California Democrat whose district includes parts of Silicon Valley, said in a Twitter post that the FDIC “must provide depositors with more clarity about what the future holds in the short term as well as the long term.” When will the dividend be paid.of their fund.

Some of the stranded deposits in SVBs could be for payroll, a concern expressed by Gary Tan, chief executive officer of Y Combinator, among others. He said in a Twitter post that the collapse could wipe out startups.

“If you have payroll and you’re tied up in a Silicon Valley bank and that money — maybe $250,000 is available on Monday — if you have 50 employees making $150,000, you’re at a loss of about $100,000 this Monday, so Everyone is quite nervous,” Jenny Fielding, co-founder and managing partner at venture capital firm The Fund, said in a Bloomberg television interview.

Vimeo Inc. And LendingClub also disclosed its exposure to SVB in the wake of the collapse.

See also  Billionaire Gautam Adani's Biography To Launch In October

According to Summers, a Harvard University professor and paid contributor to Bloomberg Television, “there are dozens, if not hundreds, of people who were planning to use that cash to meet their payroll next week.” “If this does not happen, the consequences will be really dire for our innovation system.”

Read the most from Bloomberg Businessweek

©2023 Bloomberg L.P.