The collapse of Silicon Valley Bank (SVB) — one of the largest lenders specializing in financial services to tech startups — sent the US financial system into a panic and rattled the tech sector on Friday, raising questions about companies' ability to recover. . worried about his work. Money and pays the salaries of its employees or not?
(Silicon Valley Bank) ranks 16th among American banks in terms of asset value, with assets estimated at $209 billion, and its collapse was the second largest collapse of a banking institution in the history of the United States, after the collapse of the 2008 bank (Washington Mutual). What was the reason? The financial crisis that the world was facing at the time.
(Silicon Valley Bank) The crisis began last Wednesday when the bank announced the sale of approximately $2.25 billion in shares to boost the bank's capital base after a huge loss in its investment portfolio. The bank's shares fell by 60% in trading on Thursday, and its bonds fell to record lows, which led to intense selling in US banks that spread to the Asian and European markets.
This caused panic among large venture capitalists, who advise companies in their portfolios to withdraw money from banks.
Deposits in banks managed by the Federal Deposit Insurance Corporation (FDIC) were placed in custody on Friday, but questions remain as 89% of the bank's $175 billion in deposits remain uninsured through the end of 2022, so no one knows their fate.
The consequences of the bank's collapse soon began to ripple around the world, as the bank's UK unit was on the verge of bankruptcy after going out of business and not accepting new clients. On Saturday, for example, the bosses of nearly 180 tech companies wrote to a Treasury advisor (Jeremy Hunt) asking him to step in because they couldn't use their savings to pay employees.
Here are some of the companies affected by the collapse of the Silicon Valley bank, known for serving startups, technology companies and venture capitalists:
1-Roku:
Roku is a designer and manufacturer of consumer electronics. The company provides wireless devices for streaming audio and video content from the Internet to home entertainment systems.
"It owns about $487 million of (Silicon Valley Bank's) $1.9 billion, or about 26% of the company's funds," the company said, explaining that most of its deposits in the bank are unsecured. The company does not yet know to what extent it can recover the cash deposited in the bank.
However, the company said its current cash flow and operating cash flow only last 12 months of working capital.
2- Circle Company:
The value of USDC plunged in the cryptocurrency market after Cryptocurrency Circle announced that $3.3 billion of its $40 billion cryptocurrency reserves are held in a bankrupt Silicon Valley bank.
It should be noted that USDC is one of the stable digital currencies in the cryptocurrency market because it is backed by cash reserves and short-term Treasury bills.
3- Etsy:
E-commerce company Etsy will be forced to delay payments to sellers on contracts in the coming days after the unexpected collapse of a Silicon Valley bank, an email from NBC News revealed.
Etsy uses Silicon Valley Bank to facilitate payments for some sellers on its site, but works with other payment partners to process seller payments.
The company specializes specifically in the sale of handmade, artisanal and vintage products and has more than 95 million buyers and 7.5 million sellers worldwide.
4-Roblox Company:
Online gaming platform Roblox announced that it had deposited 5% of its $3 billion in cash in a bank in Silicon Valley since February 28.
The CFO (Michael Guthrie) assured that regardless of the outcome and timing of the bank's collapse, the situation would not affect the day-to-day operations of the company. "
5-BlockFi
Crypto lending firm BlockFi has $227 million in Silicon Valley bank. The company warned that its money is not insured because it is in a money market fund, which is a type of fund that invests in short-term, low-risk securities and debt securities.
Notably, BlockFi filed for bankruptcy in November 2022 after FTX Exchange CEO Sam Bankman Fried was arrested, which led to the entire cryptocurrency market crashing.
He then filed for Chapter 11 protection in the US Bankruptcy Court for the District of New Jersey, where the company also has an international subsidiary in Bermuda.
6- Compass Coffee Company:
Compass Coffee CEO Michael Haft confirmed in an email that the Silicon Valley bank meltdown has hit payroll badly. The coffee company has been informed that the bank did not process its employees' payroll this week as expected.
Haft said they are working tirelessly to resolve this issue and are taking every possible step to prevent such things from happening again.
7- Camp Company:
Camp gaming company struggled after the Silicon Valley bank collapse and begged its customers to keep it alive.
The company emailed customers on Friday to announce a 40% price cut, using the sales to fund ongoing operations after bank failures tied up most of the company's funds.
8- Axsome Therapeutics:
Pharmaceutical company Axsome Therapeutics announced that it had deposited cash in one Silicon Valley bank and another, but believes the second bank account and existing loans are sufficient to continue the company's public and private financing operations.
Shares of the drugmaker were trading at $58.39 at the close on Friday, down 5.78% from the previous day.
9. Rocket Lab USA
Rocket Lab USA, a company that builds and launches small satellites, said it holds 7.9% of all cash, or the equivalent of $38 million, in Silicon Valley Bank.
10- LendingClub:
LendingClub, a financial services company with total assets of $8 billion, said its stake in SVB is about $21 million.
11- iRhythm Technology:
Healthcare company iRhythm Technologies said it has $54.5 million in a Silicon Valley bank, plus a $35 million long-term loan.
Staff salaries are stagnant:
Reports showed that some of SVB's existing deposits were being used to pay salaries, something that worried Gary Tan, CEO of Y Combinator, one of the leading investment firms in Silicon Valley, who tweeted: "The collapse of SVB has put thousands of startups and small businesses out of business." in danger ".
Regulators need to step in to do a *backstop* of depositors (not a bailout of a bank)
— Garry Tan 陈嘉兴 (@garrytan) March 11, 2023
40,000 SVB depositor small businesses
30% will fail to make payroll in the next 30 days
Estimate 10 employees each
120,000 jobs on the line
Years of US innovation on the line
during this time; The collapse of the Silicon Valley bank at such a rapid pace raises many questions about potential hidden weaknesses in the US financial system, as it highlights the problems plaguing other banks. The question is: Will this collapse lead to a new global financial crisis like what the world witnessed in 2008?