Crypto venture capital firms advised their portfolio companies to withdraw their investments from US commercial bank Silicon Valley Bank (SVB).
Specifically, five crypto-focused VC investors have urged portfolio companies to withdraw their funds from banks as a precaution. This comes as Silicon Valley Bank Financial Group (NASDAQ: SVB) struggles to convince clients after a capital raise resulted in a huge stock collapse. The bank Announced it proposed offers of $1.25 billion of its common shares on March 8 to shore up its balance sheet. According to the financial institution, it would use the proceeds of the sale to plug a $1.8 billion hole resulting from a $21 billion loss-making portfolio sale. In addition, the portfolio’s yield was disclosed in an investor prospectus to be an average of 1.79%, lower than the current 10-year Treasury yield of approximately 3.9%.
Questions around the capital increase, especially that it may not be enough due to the market situation of many new companies under SVB, raised concerns among investors. As a result of investor concerns, Silicon Valley Bank fell to its lowest level since 2016. The commercial bank closed down 6.41% and lost another 21.82% in the post-close trading session. At press time, SVB is trading at $82.90, losing 62.72% over the past five days. MarketWatch data shows that the financial group has not had increases in the last year. The company has plunged more than 80% in the past twelve months and is down 53.92% on its year-to-date record. It also fell almost 52% in the last three months and sank 65.81% in the last month.
Crypto-Focused Venture Firms Urge Holding Firms To Pull Funds From Silicon Valley Bank
Due to the situation, CEO Gregory Becker has reached out to clients to assure them that their funds are safe with Silicon Valley Bank. The sources disclosing the customer contact added that some startups have begun urging founders to withdraw their money from banks as a precaution. According to one of the people familiar with the matter, the Peter Thiel Founders Fund told the portfolio companies to stop doing business with SVB. A startup in San Francisco already confirmed to Reuters that they had transferred all their funds from SVB as of March 9. The startup also said that the funds were already “pending” in its other bank account before the close of business earlier that day.
Representatives of blockchain venture capital Eden Block and Mechanism Capital investment said they had encouraged companies to withdraw their friends from Silicon Valley Bank. At the same time, a Pantera Capital spokesperson confirmed that the hedge fund has begun telling portfolio firms to consider multiple accounts.
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Ibukun is a crypto/finance writer interested in conveying relevant information, using non-complex words to reach all kinds of audiences. In addition to writing, he enjoys watching movies, cooking, and exploring restaurants in the city of Lagos, where he resides.
