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Crypto venture capital firms advised their portfolio companies to pull their investments from American commercial bank Silicon Valley Bank (SVB).
Specifically, five crypto-focused venture capital investors have urged portfolio companies to withdraw their funds from the banks as a precaution. This comes as Silicon Valley Bank Financial Group (NASDAQ: SVB) struggles to convince clients after a capital raise resulted in a major stock collapse. The bank announced proposed offerings of $1.25 billion of its common stock on March 8 to shore up its balance sheet. According to the financial institution, it would use the sale proceeds to plug a $1.8 billion hole resulting from a loss-making portfolio sale worth $21 billion. In addition, it was revealed in an investor prospectus that the portfolio’s yield was an average of 1.79%, lower than the current 10-year Treasury yield of about 3.9%.
Questions surrounding the capital raise, especially that it may not be sufficient due to the market situation of many startups under SVB, triggered concerns among investors. As a result of the investor’s worries, Silicon Valley Bank declined to its lowest level since 2016. The commercial bank closed down 6.41% and shed another 21.82% in the after-hours trading session. At press time, SVB trades at $82.90, losing 62.72% in the last five days. MarketWatch data shows that the financial group has had no increases over the past year. The company has plunged more than 80% in the last twelve months and has dropped 53.92% in its year-to-date record. It also fell almost 52% in the last three months and sank 65.81% over the past month.
Crypto-Focused Venture Firms Urge portfolio Companies to Pull Funds from Silicon Valley Bank
Due to the situation, CEO Gregory Becker has been reaching out to clients to assure them that their funds are safe with Silicon Valley Bank. The sources that revealed the contact with clients added that some startups have started urging founders to withdraw their money from the banks as a precautionary measure. According to one of the people familiar with the matter, Peter Thiel’s Founders Fund told portfolio companies to quit doing business with SVB. A startup in San Francisco already confirmed to Reuters that they had transferred all their funds from SVB as of March 9. The startup also said the funds were already “pending” on their other bank account before the close of business on the same day.
Representatives for blockchain venture capital Eden Block and investment from Mechanism Capital said they had encouraged companies to pull their friends from Silicon Valley Bank. At the same time, a Pantera Capital spokesperson confirmed that the hedge fund has started telling portfolio firms to consider multiple accounts.