Concerns over a run at the 16th largest bank in the country — a major lender to tech startups — have led investors to dump shares of other bank stocks as well.
The drama started earlier this week, when SVBthat it sold about $21 billion of securities and proposed to offer over $1 billion in shares, all to fundraise for “general corporate purposes.”
The move raised eyebrows among investors, who pondered why the bank would need to raise so much money abruptly. It also raised concerns among depositors, many of whom suddenly wondered whether their money was safe at Silicon Valley Bank — a lender known for helping to finance the explosion of tech companies in the San Francisco Bay Area.
The concerns around SVB are linked to its concentration in the tech sector, an industry walloped by high interest rates and an economic slowdown. Many of the Santa Clara, California-based bank’s depositors are tech companies and venture capital funds, and it doesn’t rely on mom-and-pop savings accounts like banks familiar to the average U.S. household.
The company’s tech-focused strategy has helped it ride the industry’s massive growth leading up to and through the pandemic. But overzealous hiring during the public health crisis has more recently led the
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