Thursday, April 18, 2024

Silicon Valley Bank’s corporate clients aren’t getting any investor mercy. Their shares are down 6% even though their deposits are guaranteed

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Since Silicon Valley Bank’s collapse on Friday, listed companies big and small have come forward to try and reassure investors about their exposure to the failed lender.

So far, the market doesn’t seem convinced. Shares of the about 80 companies that have detailed their dealings with SVB have fallen by an average of almost 6% since Friday, with almost three-quarters of the group trending downwards, according to data compiled by Bloomberg. Over the same period, the benchmark S&P 500 Index traded down about 1.9%.

Though US regulators stepped in over the weekend to guarantee that all deposits in SVB would be safe, for customers of the bank things are still far from normal. Clients have struggled to pull cash from their accounts, and those that have managed to get their money are turning to more traditional banking options.

Firms that held funds at SVB vary in size from less than $5 million in market valuation to nearly $26 billion, the data show, and cover industries from biotechnology to media. Below, we round up what firms with direct exposure to the collapsed bank are saying about the impact: 

Biotech and Pharmaceuticals

Biotech and pharma firms represent the vast majority of listed companies who’ve disclosed holdings at SVB, with over 50 so far declaring assets. In general, these companies — which rely on liquid deposits to fund operations, as they take years to turn cash positive — have said their cash holdings seem well diversified and any delays shouldn’t effect their ability do business. 

While Halozyme Therapeutics Inc. is among the largest biotech company to detail its dealings with the collapsed bank, it still held funds below the standard insured limit of $250,000 with SVB. It also has plenty of access to liquidity through a $575 million revolving credit facility with Bank of America Corp. 

Just under a third of biotech companies with exposure have a market valuation of less than $100 million, but even this group believes that its cash held at SVB is immaterial to maintaining operations. Only Oncorus Inc., a Cambridge, Massachusetts-based immunotherapy developer, held cash positions over 20% with SVB. Oncorus has since said that it has regained access to all of its funds held in SVB and transferred them to alternative banking providers.

Media and Entertainment

Internet and media companies are bearing the brunt of the impact, given SVB’s darling status among Silicon Valley and technology executives. Still, most affected tech companies have said that business should continue as usual despite large portions of their liquid assets being held by SVB. 

That hasn’t stopped the market from taking a cautious approach. Shares of Buzzfeed Inc. have fallen about 25% since SVB closed, and the digital media company revealed Monday that the “majority” of its liquid funds are held with the institution. Given Buzzfeed said it doesn’t expect any disruption from the turmoil, its poor earning outlook is more likely to be dragging down the stock. 

Roku Inc. and Roblox Corp. have said the bank holds 26% and 5% of their total cash holdings, respectively. Shares for both companies have traded up since SVB’s demise, as both said they expect no disruption to their day-to-day business. 

Software & Services

Life360 Inc. is one company that has filed with the US Securities & Exchange Commission to estimate any impact resulting from its relationship with SVB, with management warning that losses could range from $0 to $5.6 million, due to of uncertainty over how the resolution process for the bank might play out. 

Of the four other software companies to announce their holdings with SVB, only Procore Technologies Inc. held more than 2% of its cash with the bank. CS Disco Inc., which uses artificial intelligence to simplify legal services, has no funds with SVB in the US, according to its filing, but did keep less than 0.25% of its liquidity with SVB UK, which was purchased by HSBC Holdings Plc for £1 ($1.20) on Monday.   

Capital Goods

Each of Rocket Lab USA, Proterra Inc. and Astra Space Inc. have disclosed their exposure to, and fallout from, SVB’s untimely demise. Proterra, which helps manufacture electric buses and charging systems, sees no impact to its financial position and operations. Both Rocket Lab and Astra, each involved in space exploration and satellite production, have significant holdings with the bank. As of its March 13 filing, Alameda, California-based Astra held 15% of its cash with SVB and “does not know” if the closure will affect its ability to access its cash held with the bank. Astra is moving to open deposit accounts with other banks.

Meanwhile, Rocket Lab had an account worth $38 million at SVB, representing approximately 7.9% of its total cash position at the end of 2022. 

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