SVB Financialparent of Silicon Valley Bank, is in talks to sell itself, sources told CNBC’s David Faber.
The bank’s efforts to raise capital have failed, the sources said, and the bank has hired advisers to explore a potential sale.
Large financial institutions are looking at a potential purchase of SVB. But outflows of deposits so far exceed the sales process, which makes it very difficult to make a realistic assessment of the bank by potential buyers, the sources told Faber.
The bank’s shares fell 60% on Thursday after SVB announced on Wednesday night a plan to raise more than $2 billion in capital. The stock fell another 60% in premarket trading on Friday before being halted on pending news. The shares did not open for trading with the rest of the market at 9:30 a.m. ET and were still halted.
According to the conditions ia the plan SVB released Wednesday was looking to sell $1.25 billion in common stock and another $500 million in convertible preferred stock.
SVB also announced an agreement with investment firm General Atlantic to sell $500 million of common stock, although that agreement was contingent on the closing of the second common stock offering, according to a filing of securities.
SVB is a major bank for venture-backed companies, and cited cash burn from clients as a reason it wanted to raise additional capital.
However, rising interest rates, fears of a recession and a slowdown in the IPO market have made it harder for early-stage companies to raise more money. This has obviously caused the companies to reduce their deposits with banks such as SVB.
Wall Street analysts said on Thursday and Friday that the problems at SVB were working unlikely to spread widely in the banking system. Morgan Stanley said in a note to clients that SVB’s questions were “highly idiosyncratic”.
Also on Wednesday, SVB announced it was selling $21 billion worth of securities to raise cash and reallocate its balance sheet toward shorter-duration assets, which are less exposed to rising interest rates. SVB estimated it took a $1.8 billion loss on that sale.