- Stock trading was halted several times during the session due to volatility.
- The company said in a letter from CEO Greg Baker on Wednesday that it had sold “substantially all” of the securities offered for sale.
- The sale of the securities will result in an after-tax loss of $1.8 billion, the SVB letter said.
In this photo illustration SVB Financial Group Trading View stock market chart on a smartphone with the SVB Financial Group logo in the background.
Igor Golovniov Lightrocket | Getty Images
Shares of technology-focused bank SVB Financial fell more than 50 percent after the company announced plans to raise more than $2 billion in capital to offset losses on bond sales.
Stock trading was halted due to volatility several times during the session, and the decline left SVB’s market cap below $8 billion.
SVB’s financials fell sharply after the bank announced plans to raise more funds.
The company said in a letter from CEO Greg Baker on Wednesday that it has sold “substantially all” of the securities offered for sale and is looking to raise $2.25 billion between common equity and convertible preferred stock.
Investment fund General Atlantic has committed to contribute $500 million of the total, the letter said.
The sale of the securities will result in an after-tax loss of $1.8 billion, SVB’s letter said, but the company said plans to reinvest the proceeds should be immediately acceptable as the bank adjusts its balance sheets.
The company previously reported $28.8 billion in marketable securities at the end of December, as well as $95.3 billion in notes held to maturity. The securities offered for sale were mostly US Treasuries.
The Federal Reserve has raised interest rates significantly over the past year, which can cause bond prices to fall — especially those with more years to maturity. SVB said it is reinvesting the proceeds from the sale into short-term assets.
The bank cited high interest rates and “cash burn from our customers” as reasons for raising the new capital. The company is heavily involved with start-up companies, with SVB accounting for nearly half of the venture-backed technology and life sciences companies in the United States bank on its website.
In a note to clients, Wells Fargo Bank analyst Mike Mayo said SIVB’s issues stemmed from a “lack of liquidity.” High interest rates, fears of a recession, and a fast-paced market for startup public offerings have made it difficult for startups to raise additional capital.
SVB’s surprise fall comes shortly after crypto-focused bank Silvergate announced plans to liquidate. SVB said in the letter that it has minimal exposure to crypto.
— CNBC’s Michael Bloom contributed to this report.