SVB Financial Shares Plunge 60% on Stock Sale Plan to Offset Bond Losses

Shares of SVB Financial, a tech-focused bank, dropped by as much as 60% on Thursday, sending the company’s market capitalization below US$7 billion, after the business disclosed plans to raise more than $2 billion in capital to help offset losses on bond sales.

SVB Financial Group shares lost over $80 billion in value overnight, falling by US$161.79, or 60.41%, to US$106.04, the biggest loss since the bank’s 1988 IPO. During extended trading hours, the stock price fell another 22.20%, to US$82.50.

Stock trading was halted several times during the session due to high volatility.

The lender began a share sale on Wednesday with a total offering of US$1.75 billion in an effort to bolster its balance sheet and handle dwindling deposits from startups that are battling higher spending and a lack of available money.

In a statement published on Wednesday by CEO Greg Becker, the business stated that it had sold “substantially all” of its available-for-sale securities and that it was attempting to raise US$2.25 billion in total through the sale of common equity and convertible preferred shares.

According to the letter, investment fund General Atlantic has already promised to contribute $500 million toward that total.

The sale of securities will lead to a loss in earnings after taxes of US$1.8 billion, noted in the letter. However, the business said that its plan to reinvest the proceeds should be “immediately accretive” as the bank restructures its balance sheet.

According to two persons who are familiar with the matter, after the stock dropped by 60%, Becker has been calling customers to reassure them that their money is secure within the bank. Some startups have advised their founders to withdraw their money from SVB as a preventive step, said sources.