- By James Clayton, Peter Hoskins and Annabelle Liang
- in San Francisco and Singapore
Updated 1 hour ago
Shares in Silicon Valley Bank (SVB), a key lender to technology start-ups, fell on Thursday as investors moved to withdraw their deposits.
The slide came the day after the bank announced a share sale of DKK 2.25 billion.
Shares in banks have fallen around the world – with the four largest US banks, including JP Morgan and Wells Fargo, losing more than 50 billion. USD in market value.
A venture capitalist told the BBC that today’s events were “wild” and “brutal”.
Stock markets in Asia also fell on Friday, led down by shares in banks.
Shares in SVB saw their biggest one-day drop on record, falling more than 60% and losing another 20% in after-hours trading.
But more worryingly for the bank, some start-ups that have money deposited have been advised to withdraw money.
Hannah Chelkowski, founder of Blank Ventures, a fund that invests in financial technology, told the BBC the situation was “wild”. She advises companies in her portfolio to withdraw funds.
“It’s crazy how it’s just unraveled like this… What’s interesting is that it’s the most start-up friendly bank and supported start-ups so much through Covid. Now VCs are telling their portfolio companies to pull their funds,” she said.
“It’s brutal,” she added.
SVB is a major lender to early-stage companies and is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on the stock markets last year.
SVB did not immediately respond to a request from the BBC for further comment.
In the broader market, there were concerns about the value of bonds held by banks as rising interest rates made those bonds less valuable.
Central banks around the world – including the US Federal Reserve and the Bank of England – have raised interest rates sharply as they try to curb inflation.
Banks tend to hold large portfolios of bonds and as a result are sitting on significant potential losses. The decline in the value of bonds held by banks is not necessarily a problem unless they are forced to sell them.
But if lenders like Silicon Valley Bank have to sell the bonds they hold at a loss, that could have an impact on their profits.
“The banks are victims of the rise in interest rates,” Ray Wang, founder and chief executive of Silicon Valley-based consultancy Constellation Research, told the BBC.
“No one at Silicon Valley Bank and many places thought that these rate hikes would have lasted this long. And I think that’s really what happened. They bet wrong,” he added.