Two tech-centric financial services operations have hit trouble, giving confidence in the sector another kicking.

One of the banks, Silicon Valley Bank (SVB), a part of the SVB Financial Group, bills itself as serving “innovation companies from their earliest stages - before they get their first round of VC funding - all the way through and beyond their IPOs. We also serve their investors and founders. We are proud to bank nearly half of U.S. venture-backed technology and life science/healthcare companies.”

In mid-February SVB shares sold for $315 apiece. On March 8th they could be had for $265. At the time of writing shares were trading for $105.

The reason for the plunge was outlined in a Wednesday announcement that SVB sold off $21 billion of securities - and made a $1.8 billion loss on that sale - and took action to raise around $2.25 billion.

A letter to investors [PDF] explained that the sell-off and capital raising are essentially precautionary.

“Even before today, we had ample liquidity and flexibility to manage our liquidity position,” wrote president and CEO Greg Becker, who went on to state “VC deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted. The related shift in our funding mix to more, higher-cost deposits and short-term borrowings, coupled with higher interest rates, continues to pressure net interest income (NII) and net interest margin (NIM).”

That’s bank-speak for “we lent money to startups who are spending it faster than expected, and some of them look like they might not make it because the economy is a mess and investors are out of love with tech”.

As indicated by the 60 percent share price plunge, investors hate these actions because they signal SVB’s investment portfolio was not in great shape and needed sudden attention and the injection of $20 billion. The term “fire sale” is being bandied about with reference to the $21 billion securities sell off.

In the wake of SVB's news, its systems have gone down. At the time of writing the org's website states "Silicon Valley Bank's online banking system and mobile services are currently unavailable" but doesn't explain why

BREAKING: Silicon Valley Bank $SIVB online banking system and mobile services are now unavailable for business clients.

The stock is down over 80% today alone. pic.twitter.com/oJ1sSyLXnV

- Stock Talk Weekly (@stocktalkweekly) March 9, 2023

SVB’s letter to shareholders incudes news that “Our exposure to crypto is de minimis.”

The same can’t be said of Silvergate Bank, an outfit that proudly claims to “serve over 750 of the most recognized and well-funded digital currency exchanges, institutional investors, and software developers in fintech.”

Silvergate Bank does that with the "Silvergate Exchange Network", a service that “allows institutional investors to move U.S. dollars to digital currency exchanges and trading partners 24/7 in real time at no extra cost.”

But the outfit’s decided not to do that anymore - it closed the Network last week.

And on Wednesday the outfit announced the Bank’s holding company “believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward.”

Unlike the unplanned collapse of similar crypto outfits, Silvergate Bank plans “full repayment of all deposits” and will even try to find a buyer for its platforms and tech.

Silvergate cited “recent industry and regulatory developments” as the reasons to wind up the Bank. That’s crypto-speak for “the fun times when you could do anything with tokenised assets without regulatory scrutiny is over and the bottom has fallen out of crypto as a result.”

Silvergate shares took a one-day dip from $4.91 on Wednesday to $2.86 on Thursday.

Both incidents have been taken as a sign of weakness in the tech sector. And as that sector has been a bright spot for investors in recent years, and economic data from around the world does not currently make pleasant reading, the woes of SVB and Silvergate are most unwelcome. Especially given that they come on top of the tech sector’s pessimistic view of its own short-term future, as shown by the tens of thousands of layoffs by large tech companies. ®

https://www.theregister.com//2023/03/10/silicon_valley_tech_bank_troubles/