SVB Securities management exploring buying firm back | Hacker News Reader

SVB Securities management exploring buying firm back

bloomberg.com

78 pointsmfiguiere30 comments

Seems like the best case scenario for everyone. Buy the parent company. Make depositors whole (in theory). Keep all or most of the employees and business model. Blame a few upper management folks for causing this, fire them for good PR. Don't lock up most funds again in long bonds.

I think the article is about the SVB Securities subsidiary (an investment bank) spinning off itself with a management buy-out.

Sadly this is not about the main bank and will not save it.

Sort of ejection pod for investment bankers tied to the mothership and deciding it is time to separate…

(edited: typo)

This makes sense

in the same way repealing Glass Steagall did not make sense.

Fun fact: the Volcker rule, which was like the diet glass steagall from 2008, was declawed a couple years ago.

This is what happens when you limit liability and bail these people out.

Yes, SVB Securities is a separate entity from SVB, the bank. See this press release from PRNewswire: https://www.prnewswire.com/news-releases/svb-securities-cont...

SVB Securities LLC recently - at the beginning of last month - changed its name from SVB Leerink LLC to SVB Securities LLC: https://www.svb.com/de/news/company-news/svb-leerink-llc-ann...

The Wikipedia page states that SVB Securities' leadership plans to buy back the company from its parent org, SVB (the bank): https://en.wikipedia.org/wiki/SVB_Securities

It's sloppy reporting in this article that the reporter mixes up SVB, the bank, with SVB Securities; Joe Gentile is the CAO (Chief Administrative Officer) of SVB Securities / Leerink: - https://www.svbsecurities.com/team/joseph-gentile/ - https://news.yahoo.com/silicon-valley-bank-exec-lehman-00055...

Note that 'Yahoo! News' - f/k/a the Verizon Media Group - was bought by Apollo Capital Management a few years ago, so perhaps Apollo is short SVB and that's why 'Yahoo! News' is amplifying this narrative about the CAO having worked at Lehman until 2007; recall that Lehman imploding in 2008 is largely seen as one of the catalysts for the 2008 Global Financial Crisis.

After the panic, I really doubt they can survive Monday. First thing every customer will do if they reopen the bank "as a normal business day" is transfer out all their funds, which will make the bank fail again. I'm afraid it's too late.

That won't with FDIC involvement. First, until they figure out the long term plan, nobody will be able to take more than the 250k that's covered by the FDIC. Second, the long term plan will probably be that much larger bank takes over that can guarantee most or all the remaining deposits, in which case there's no point in pulling your money out, unless you want to keep $3 billion under your mattress.

This is what I don't understand about the conversation online. What you described (what I've heard is likely to happen) isn't a bailout. Yet many people are talking about this being a bailout.

In this scenario, SVB shareholders would eat the loss, no?

Shareholders are lowest in the totempole. They get zero. Debt and deposits take priority

It's a bailout for the depositors. Some of those depositors are multi-billion dollar companies. However, even though they are above the FDIC limit, there is a good chance they will get most or all of their money back. If the assets are worth enough to more than repay the depositors, shareholders may get a nominal sum when the dust settles, but probably they will get zero.

Who is bailing them out though? My understanding is that SVB still had cash and 10 year MBS that cover 90%+ of deposits if those MBS were able to mature. And because of that when another bank takes over these accounts, they will (as a condition from the FDIC) honor those deposits.

When people say bailout, they refer to tax dollars going to bailing out an entity.

I could be 100 percent off base but that's my understanding.

> When people say bailout, they refer to tax dollars going to bailing out an entity.

One thing I've learned over the years is that lots of people use words wrong, especially regarding financial topics.

After seeing the ridiculousness that gets posted any time topics like short selling, stock buy-backs, tax writeoffs or fed policy get discussed, I'd be cautious about assigning a narrow meaning to what random internet posters mean when they say "bailout".

Bailout can refer to depositors who could not get back 100% of their assets above the FDIC limit based solely on SVB assets getting made whole (what I was referring to) or to the shareholders getting made whole (which I took great pains to explain as a different situation I was not referring to). But fundamentally the term "bailout" could be used to refer to either and distinguishing those two states is valuable.

The Fed and FDIC are going to bailout depositors by guaranteeing that whichever bank takes them over won't lose money on the deal. That is, the assets might be worth 90% of the liabilities, and the insured accounts cover another 5%. So the FDIC and/or fed will cover the last 5% of the money owed to depositors. In part, by doing so quickly, they can have Monday morning a full guarantee by (huge bank) be the next news story.

The stockholders are not being bailed out. They may get something back if the assets happen to exceed the liabilities. But I would need amazing odds of make that bet. I fully expect depositors to get made 100% whole, with something like 95% coming from existing assets/covered FDIC accounts and the remaining 5% coming from other entities.

It depends. A larger bank may not be allowed to do so if they are a g-sib.

Complete reserve banks can handle 100% withdrawals effortlessly and continue to operate.

insiders using inside information to cut themselves a sweet deal so we can all watch them get rich on the full faith and credit of the govt, and then I have to hear the majority of HN scream bloody-wealth-gap-murder and advocate trying to undo it with completely inefficient progressive tax policy on the rest of the economy? no thanks. Just shut it down and leave a relatively small number of rich people* not whole (*if you lost substantial assets beyond the FDIC limit in this bank, that means you had substantial assets ie rich, not my problem, I'm diversified. Who even keeps money in the bank anyway, it should always be invested.)

The large majority of accounts at SVB were held by businesses. The businesses need to make payroll. The problem is businesses not making payroll for their staff.

They'll certainly get bridge loans to handle that if they're fiscally sound. And there's no indication that "there's nothing left, and everyone has lost everything above $250k", it'll just take a while, and they might lose a few %.

There are these $40b dollars that were transferred from the bank during bank run? Can maybe the the VCs responsible for the bunk run step in and pitch in 5% from that to fund the payroll?

SVB claims are trading around 60¢ on the dollar. Nobody should be more than a few days delayed on near-term payroll.

Are uninsured deposits going to only receive 60¢ on the dollar?

The smart money (the people buying at 60c) presumably expects them to receive quite a bit more. Those selling at 60c are generally doing so because they are desperate for the cashflow. Likely the number will go up as more cautious/less nimble entities are able to evaluate the trade and decide they can buy the claims at a higher price.

I'd bet on 80%+ probability of uninsured depositors getting back 100c on the dollar, 99% they get back at least 60c on the dollar.

During IndyMac, widely considered the worst bank failure in the fdic regime, uninsured depositors eventually got back over 85% of their deposits.

They had 50% in hand the week after the receivership.

How can I buy those claims? While I certainly don't think it's 100%, I also thinks the redemption will be higher than 60%

SVB also lent to VCs/PEs on behalf of LPs? Not sure how big that portion of their business was.

actually, not making payroll is one of the conditions that can pierce the corporate veil, shareholders would need to pony up more money. But in the bankruptcy situation before that, payroll would be at the front of the line for the trustee to pay out to first, assuming some assets which of course there are.

https://archive.ph/pgsOL

So when do we find out if loads of startups are going bust or not?

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