Silicon Valley Bank (SIVB), the 16th-largest bank in the United States, was closed by regulators Friday after its stock plummeted over a two-day period. Cash needs for client withdrawals exceeded the company’s available cash, and the bank was forced to liquate and sell their entire book, taking a $1.8 billion loss.
Hedgeye Financials analyst Josh Steiner says this environment of continued rising rates should not have triggered what happened in the past 24 hours. He explains SIVB’s customer base (primarily venture capital funds, including tech startups and biotech companies) are seeing greater cash burn and had a need to withdraw more than the bank was in position to provide.
“This dynamic with Silicon Valley is sending shockwaves across every bank in America right now,” Steiner explains in this clip from The Call @ Hedgeye.
“They are tuned into this thing like a hawk, and they are basically convening emergency sessions right now to talk about this situation and what’s going on to mitigate any similar risk.”