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k8t

This is not a perfect analysis, but:

- Roku has 487M in SVB

- After the 8-K released, Roku lost 323M in market cap

Basically, the market is expecting around 30c of value recouped for every dollar inside of SVB.

(note: I know this analysis isn't perfect, but it gives a rough idea)

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The market expects the bank going under to impact Roku by that much expected value. That's very different than saying the market expects a certain percentage of money to be returned in the end and it's not clear why this is supposed to give even a ballpark estimate of the expected recoup. After all the share price has way more to it than what the current assets come to.

It's also very likely the market changes its mind shortly, especially if Roku lays out the plan and expected impact to operations in more detail.

The drop is in the aftermarket immediately after the 8-K release, so I think we can attribute most of it to the market's gut reaction to this piece of news and not the broader SVB impact (which would have occurred during market hours).

Agree that the market might change its mind quickly, especially if estimated recoveries are projected to be high or the depositors completely made whole.

Assuming the markets are rational ;) we take it as an axiom, but that is different than saying expectations are always priced in

> Assuming the markets are rational ;)

I mean, they are on a long enough timeline, but they tend to be able to stay irrational longer than you can remain liquid.

Absolutely it’s the reasonable cause but as explained there is a difference between the news being the expected cause and the drop being what the market thinks the assets recoup will be.

I'd be pretty happy to buy SVB deposits at 30c if I could do that without exposure to Roku everything else, etc.

This is absolutely not how the stock market works. Market cap is not based on book value.

I would bet it’s 80 cents on the dollar

It's exceedingly unlikely to be anything less than 99. The FDIC wants to reassure everyone so there aren't more runs. Do you really think they're going to let the eventual purchaser not make everyone whole?

That's a bold statement and not in line with FDIC actions for previous bank failures.

Is it not? Most of the time the FDIC will find a buyer and guarantee some percentage (usually ~80%) of all losses to the purchasing bank (plus the very low upfront purchase price, of course) in exchange for them honoring all deposits. So ensuring most deposited funds are safe, at least in the long term, seems to be in line with their usual playbook, even if the unusual circumstances around this particular failure might make that less likely.

> in 55 failures since IndyMac of banks with total deposits over $1 billion, uninsured deposits were fully protected against any loss. The largest failure, Colonial Bank, had $20 billion of deposits, including an estimated $4.4 billion of uninsured deposits.

https://www.cato.org/commentary/fdic-invents-costly-solution...

Meanwhile, svb had north of 160bik deposits with an estimated 93% uninsured.

Scope is a bit different.

The article goes on to note that when FDIC wound up Wachovia in 2008 there were $130Bil in uninsured deposits and all of them were made whole.

You are making the assumption that that $1 in a company's checking account corresponds to $1 of their market cap, which is not even remotely the case.

A much more believable hypothesis is that investors saw the headline, went "Roku is affected by SVB!!" and panic sold.

I was under the impression that, at least to a first order, $1 in cash in a company's checking account (money that could be immediately released to shareholders) does correspond to $1 of their market cap (MC=EV-Debt+Cash [1]). Why do you think this is not the case here?

[1] https://corporatefinanceinstitute.com/resources/valuation/en...

Because that isn't a physical law.. it's a metric.

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