Silicon Valley Bank’s Spiral

What a panic. You might have thought a new coronavirus had surfaced in Silicon Valley Bank’s Santa Clara, Calif., headquarters, as SVB investors (and, apparently, depositors) rushed for the exits. SVB’s shares fell 60% in regular trading and another 21% after hours. This doesn’t seem likely to end well. My best guess is that SVB will get acquired by a bigger bank that can calm everyone down.

The pity is that the sell-off hardly seemed justified by the bank’s fundamentals, at least as of Wednesday. But this is one of those situations where perception is everything. The stock plunge, while initially sparked by a share offering the bank announced on Wednesday night, appeared to fuel anxieties among its customers about the safety of their money. Venture capital firms didn’t help by telling their portfolio companies to withdraw their deposits from the bank, as we reported today. A classic example was the note from VC firm USV to founders this week that “SVB is in a severe cash crisis.” If there wasn’t a crisis before, there likely was after that went out!