SVB Financial, parent of Silicon Valley Bank, is in talks to sell itself, sources told CNBC’s David Faber.
Attempts by the bank to boost capital have failed, the sources said, and the bank has hired advisors to explore a possible sale.
Large financial institutions are taking a have a look at a possible purchase of SVB. Nonetheless, deposits outflows are thus far outpacing the sale process, making it very difficult for a practical assessment of the bank by potential buyers to happen, the sources told Faber.
Shares of the bank fell 60% on Thursday after SVB announced a plan Wednesday evening to boost greater than $2 billion in capital. The stock fell one other 60% in premarket trading Friday before being halted for pending news. The shares didn’t open for trading with the remainder of the market at 9:30 a.m. ET and were still halted.
Under the terms of a plan released Wednesday, SVB was seeking to sell $1.25 billion in common stock and one other $500 million of convertible preferred shares.
SVB also announced a cope with investment firm General Atlantic to sell $500 million of common stock, though that agreement was contingent on the closing of the opposite common stock offering, in keeping with a securities filing.
SVB is a serious bank for venture-backed firms, and cited money burn from clients as one reason it was seeking to raise additional capital.
Nonetheless, rising rates of interest, fears of a recession and a slowdown available in the market for initial public offerings has made it harder for early stage firms to boost additional cash. This has apparently led the firms to attract down on their deposits at banks like SVB.
Wall Street analysts said Thursday and Friday that the troubles at SVB seemed unlikely to spread widely throughout the banking system. Morgan Stanley said in a note to clients that SVB’s issues were “highly idiosyncratic.”
Also on Wednesday, SVB announced it sold $21 billion price of securities to boost money and reposition its balance sheet toward assets with a shorter duration, that are less exposed to rising rates of interest. SVB estimated that it took a $1.8 billion loss on that sale.
