Silicon Valley Financial institution collapse was ‘Lehman second for expertise,’ high Goldman Sachs deal-maker says
The collapse of Silicon Valley Financial institution was a “Lehman second” for the expertise business, in keeping with a high Goldman Sachs deal-maker.
Cliff Marriott, co-head of expertise, media and telecoms in Europe for the funding banking division of Goldman Sachs, mentioned that the March 10 shutdown of SVB was “fairly nerve-racking,” because the lender’s clientele scrambled to determine how they’d make payroll.
“That first weekend was just a little bit just like the Lehman second for expertise and it was actually extra operational for these firms,” Marriott informed CNBC’s Arjun Kharpal in an interview at a Goldman Sachs tech symposium that aired Tuesday on “Squawk Box Europe.”
“They wanted entry to capital. Numerous their balances have been on SVB. And, secondly, SVB was propelling and making loads of their funds for payroll to pay their staff.”
Based in 1983, SVB was thought of a dependable supply of funding for tech startups and enterprise capital corporations. A subsidiary of SVB Financial Group, the California-based industrial lender was, at one level, the 16th-biggest financial institution within the U.S. and the biggest in Silicon Valley by deposits.
SVB was taken over by the U.S. authorities after its clientele of enterprise capitalists and tech startups withdrew billions from their accounts. Many VCs had suggested portfolio firms to drag funds on the again of fears that the lender might crumble.
SVB Monetary Group’s holdings — property corresponding to U.S. Treasury payments and government-backed mortgage securities that have been considered as secure — have been hit by the Fed’s aggressive rate of interest hikes, and their worth dropped dramatically.
Earlier this month, the agency revealed it had offered $21 billion value of its securities at a roughly $1.eight billion loss and mentioned it wanted to boost $2.25 billion to satisfy shoppers’ withdrawal wants and fund new lending.
The way forward for SVB stays unsure, regardless that deposits have been finally backstopped by the federal government and SVB’s government-appointed CEO tried to reassure shoppers the financial institution remained open for enterprise.
Marriott mentioned there’s “nonetheless a giant query mark relating to what financial institution or agency or set of corporations goes to switch SVB by way of offering these utility-like companies for expertise, giving them financial institution accounts, permitting them to make payroll, holding their money balances.”
The SVB collapse has additionally raised questions over the potential penalties for different banks, with SVB being removed from the one lender that has come below pressure. Swiss funding banking titan Credit Suisse was rescued by its foremost rival UBS in a government-backed, cut-price deal final week.
Marriott additionally addressed tech IPOs and their outlook for 2023. Europe’s tech preliminary public providing market has been largely closed as a consequence of a confluence of market pressures, together with increased rates of interest, which make the longer term cashflows of high-growth tech firms much less engaging.
Marriott mentioned he would have been extra optimistic a few restoration in tech IPO exercise two weeks in the past.
“I am nonetheless hopeful that we’ll see tech IPO exercise in 2023. And if we do not, I feel 2024 might be a giant yr for tech IPOs,” Marriott mentioned.
“I feel what we’ll see is the extra established worthwhile firms come first, so the easier-to-understand enterprise fashions, worthwhile firms, earlier than we see the actually extremely valued revenue or detrimental revenue firms that we noticed in 2021.”
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