- Trading in the stock was halted due to volatility several times during the session.
- The company said in a letter from CEO Greg Becker on Wednesday that it had sold “substantially all” of the securities for sale.
- SVB’s letter said the bond sale would result in an after-tax loss of $1.8 billion.
In this photo chart of SVB Financial Group’s TradingView stock market chart, the SVB Financial Group logo is shown on a smartphone in the background.
Igor Golovnyov | Lightrocket | Good pictures
Shares of tech-focused bank SVB Financial fell more than 50% on Thursday after the company announced plans to raise more than $2 billion in capital to cover losses on bond sales.
Stock trading was halted due to volatility several times during the session, and the fall brought SVB’s market capitalization below $8 billion.
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SVB Financial fell sharply after announcing plans to raise more cash.
The company reported in A Letter On Wednesday, CEO Greg Becker said it has sold “substantially all securities” available for sale and plans to raise $2.25 billion between common equity and convertible preferred stock.
Investment fund General Atlantic has already pledged to contribute $500 million of that total, according to the letter.
SVB’s letter said the loss of after-tax earnings from the bond sale was $1.8 billion, but the company said its plan to reinvest the proceeds “must be mobilized immediately” as the bank overhauls its balance sheet.
The company previously reported that it had $28.8 billion of marketable bonds on its balance sheet at the end of December, as well as $95.3 billion of maturing bonds. Bonds available for sale are mostly US Treasuries.
The Federal Reserve has raised interest rates aggressively over the past year, which could reduce the value of bonds — especially those that take years to mature. SVB said it will reinvest the proceeds from its sale into short-term assets.
The bank cited higher interest rates and “burning more money from our customers” as reasons for raising new capital. The firm is heavily involved with startups, with nearly half of all venture-backed technology and life sciences companies in the U.S. Bank, according to its website.
Wells Fargo banking analyst Mike Mayo said in a note to clients that SIVB’s problems stemmed from a “lack of financial diversification.” High interest rates, fears of a recession and a sluggish market for initial public offerings have made it difficult for startups to raise additional capital.
SVB suffered a dramatic decline shortly after crypto-focused bank Silvergate announced liquidation plans. SVB said in its letter that it has limited exposure to crypto.
— CNBC’s Michael Bloom contributed to this report.
