The collapse of Silicon Valley Financial institution was a “Lehman second” for the know-how trade, based on a prime Goldman Sachs deal-maker.
Cliff Marriott, co-head of know-how, media and telecoms in Europe for the funding banking division of Goldman Sachs, stated that the March 10 shutdown of SVB was “fairly hectic,” because the lender’s clientele scrambled to determine how they’d make payroll.
“That first weekend was somewhat bit just like the Lehman second for know-how and it was actually extra operational for these corporations,” Marriott informed CNBC’s Arjun Kharpal in an interview at a Goldman Sachs tech symposium that aired Tuesday on “Squawk Field Europe.”
“They wanted entry to capital. Quite a lot of their balances have been on SVB. And, secondly, SVB was propelling and making a whole lot of their funds for payroll to pay their workers.”
Based in 1983, SVB was thought of a dependable supply of funding for tech startups and enterprise capital corporations. A subsidiary of SVB Monetary Group, the California-based business lender was, at one level, the Sixteenth-biggest financial institution within the U.S. and the most important 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 corporations to drag funds on the again of fears that the lender could crumble.
SVB Monetary Group’s holdings — property corresponding to U.S. Treasury payments and government-backed mortgage securities that have been seen as protected — 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 bought $21 billion price of its securities at a roughly $1.8 billion loss and stated it wanted to lift $2.25 billion to satisfy shoppers’ withdrawal wants and fund new lending.
The way forward for SVB stays unsure, regardless that deposits have been in the end backstopped by the federal government and SVB’s government-appointed CEO tried to reassure shoppers the financial institution remained open for enterprise.
Marriott stated there may be “nonetheless an enormous query mark concerning what financial institution or agency or set of corporations goes to interchange SVB by way of offering these utility-like providers for know-how, 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 score Suisse was rescued by its principal 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 resulting from a confluence of market pressures, together with increased rates of interest, which make the longer term cashflows of high-growth tech corporations much less engaging.
Marriott stated he would have been extra optimistic a couple of 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 believe 2024 can be an enormous 12 months for tech IPOs,” Marriott stated.
“I believe what we’ll see is the extra established worthwhile corporations come first, so the easier-to-understand enterprise fashions, worthwhile corporations, earlier than we see the actually extremely valued revenue or unfavorable revenue corporations that we noticed in 2021.”
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