Thread by @mbdailyshow

Silicon Valley Bank is imploding before our eyes

here is how SVB threw 50 years of goodwill and $80 billion down the drain in just 30 hours

1/ To understand this situation is to understand SVB's place within the startup ecosystem

SVB situated itself as the bank for founders

Just signed a fat Series A? Put the money in SVB

2/ And lots of people we're signing fat Series A's back at the start of the pandemic

Deposits in SVB grew from $60 billion in 2019 to over $189 billion in 2022

3/ With all that money rolling in, SVB wanted to put the money to work

They ended up buying $80 billion in Mortgage Backed Securities (MBS) with an average yield of 1.5%

4/ With interest rates at historic lows, that 1.5% yield didn't look half bad

Then interest rates started to rise

5/ With every rate hike, the $80 billion SVB had locked up looked worse and worse

Then deposits also started to fall

6/ Those absurd valuations and checks startups were getting?

They came back down to earth which means SVB wasn't getting the inflows it once was

7/ Since it was in a more precarious position than before, SVB decided to sell some securities (at a loss) in order to give themselves a little breathing room

the idea was to free up more capital and improve their liquidity

8/ Turns out that was a HUGE mistake

Even though SVB didn't have a liquidity problem, investors got spooked and reacted as if it did

9/ A hilariously bad and convoluted press release yesterday only served to make investors more nervous

over the past two trading days SVB is down over 70% and its still falling

10/ As the stock continues to free fall, SVB has wisely decided to scrap its capital raise

not because they realized it was a bad idea

but because they are now considering a sale

11/ All of this has obviously spooked founders as well

Lots of VCs have jumped in to advise founders to get their money out of SVB

that's sparked a bank run

12/ Making matter worse, only 2.7% of SVB deposits are FDIC insured

97.3% aren't

3/ It's truly wild

SVB went from one of the most important banks in the startup world with 8,500 employees, to being sold for scraps in the span of 30 hours

14/ Google can't even populate the daily stock chart for SVB right now, its falling so fast

15/ And the broader bank sector is getting slammed too (but most believe the risk of serious contagion is low)

16/ This is still an ongoing situation but here's to hoping SVB figures things out

Mark Cuban said it best

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sheeeeeeesh

Quick video explainer as well

Giannis knew…

Honestly this kid explains it better than we ever could