Silicon Valley Bank crisis sends shockwaves through Israeli high-tech
SVB, which is considered to be one of the most prominent financiers of Israeli startups, saw its shares suffer their biggest one-day drop on record as they plummeted by more than 60% on Thursday and lost another 20% in after-hours trade
Silicon Valley Bank (SVB), which finances according to estimates more than 100 Israeli startups, is facing a severe crisis that could have major ramifications for Israeli high-tech.
SVB shares suffered their biggest one-day drop on record as they plummeted by more than 60% on Thursday and lost another 20% in after-hours trade. The plunge came on the back of the bank's announcement of a $1.75 billion share sale, which came after the firm lost around $1.8 billion when it sold a myriad of assets, mainly U.S. treasuries.
SVB is one of the most central and oldest banks active in the high-tech industry. It is considered to be one of the most prominent financiers of Israeli startups and has a team of dozens of employees in Israel.
Sources in the financial system point out that the interest rates offered by SVB were considered attractive both on the deposit side and on the loan side. However, rising interest rates did not work in the bank's favor, eroding its profitability, with the crisis in the startup world in the last year and the shrinking of investments in them, also hurting SVB's bottom line.
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In its announcement, SVB stated that it is selling its securities portfolio and raising funding with the expectation that the high interest rate environment will continue. It is possible that these actions will be enough to stabilize the bank, which was established 40 years ago, and managed to overcome previous crises.
"The Silicon Valley raise got everybody nervous about people's capital levels and what deposits are doing. A lot of institutional investors don't feel great about owning certain banks right now," R.J. Grant, head of trading at Keefe, Bruyette & Woods in New York told Reuters.
"It just gets people freaked out because Silicon Valley, historically has been a very strong, well-run bank. If they're having issues right now, people are wondering what about other banks that are lesser quality and that don't have the reputation that Silicon Valley Bank has."
