SIVB Stock Alert: The FDIC Has Taken Over Silicon Valley Bank. What Comes Next?
All eyes (or at least most) are on SVB Financial Group (NASDAQ:SIVB), specifically its Silicon Valley Bank subsidiary, today. The Silicon Valley bank’s shares have plunged, and regulators have halted trading. At last check…
All eyes (or at least most) are on SVB Financial Group (NASDAQ:SIVB), specifically its Silicon Valley Bank subsidiary, today. The Silicon Valley bank’s shares have plunged, and regulators have halted trading. At last check, SIVB stock most recently traded at $39.40, a stark decline from yesterday’s close of $106.04, which was down substantially from Wednesday, where shares traded around $270 apiece.
The reason for today’s decline and ultimate halt is simple. The U.S. government has taken control of the bank to ensure depositors will be made whole or as whole as possible.
The Federal Deposit Insurance Corporation (FDIC) has created a new bank. This bank will receive all SVB deposits and ensure that all insured depositors (those with $250,000 or less deposited) will receive access to their funds “no later than Monday morning.”
While that’s great news for those who have banked with SVB, this means the bank has essentially failed. Thus, those in the equity markets who did not sell this week may receive little, if nothing, from their investment.
Let’s dive into what this fallout could mean for the broader market and what this means for investors.
SIVB Stock Plunges As Regulators Take Over
Any time a bank fails, it’s a big deal. Indeed, this is the largest bank failure since 2008 and the last investors have seen since late-2020.
Given the macro backdrop, the outlook for other regional and niche banks remains uncertain. Shares of other regional banks, particularly those with tech exposure (or California-based banks), are also seeing steep declines today. That’s because, right now, there’s no indication of how widespread any contagion risk could be.
Many experts appear to believe that the risks to SVB are, as Morgan Stanley analysts put it, “idiosyncratic.” In layperson’s terms, that means that any sort of systemic risk is likely to be limited. That’s good news for those in larger financial institutions, many of which have seen solid price action in the market today.
For SVB investors, it appears that this bank isn’t too big to fail. It’s incredible to think about a medium-sized bank such as SVB shuttering its operations. Indeed, SVB’s status as a mainstay lender for venture companies seeking debt financing for the past four decades will leave a big hole for early-stage companies.
Additionally, given the undetermined status of SVB’s current deposit total, those banked with SVB may not be entirely whole. In this regard, we’ll have to see what regulators say in the coming hours and over the weekend.
While systemic risk may be limited, this is a big event all investors will want to watch over the next few days.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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