A Brinks armored truck sits parked in front of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.
European stock markets fell on Monday amid concerns over the fallout from the failure of Silicon Valley Bank, the US bank known for lending to technology companies, despite moves by regulators to stem the crisis. and avoid the domino effect of various measures.
U.S. markets also opened the week lower, driven by a decline in banking stocks, but they recovered and were barely changed at 10 a.m. ET after U.S. President Joe Biden tried to reassure of investors, saying: “There are no losses that will be borne by the taxpayers.”
The ripple effects of the SVB collapse will also affect the US entertainment industry. Hollywood payroll services firm Wrapbook, which told production company customers on March 10 that payroll processing would be delayed, provided an update to clients on Sunday saying it would process outstanding workers paid on Monday by direct deposit and expected to be “fully operational” by Wednesday.
Several companies with ties to the entertainment business, such as Roku, Vimeo and Roblox, said in regulatory filings Friday that they have bank accounts. That being said, none of them said that the failure of the SVB had a major impact on their ability to operate. At least one analyst also reiterated his bullishness on Roku despite a Friday warning from the technology company about the collapse of Silicon Valley Bank.
Roku said it has $487 million in SVB, more than a quarter of its total assets. “At this time, the company does not know to what extent the company will be able to withdraw the cash in the SVB deposit,” Roku warned on Friday. A group of Evercore ISI analysts in a Monday report concluded that Roku has “significant exposure” to the SVB crisis.
But Wedbush Securities analyst Michael Pachter reiterated his “outperform” rating and $80 price target on Roku’s stock on Monday. “Although Roku’s current cash concerns are likely to affect its share price, we believe Roku’s new products and features will drive enough user growth to insulate it for the foreseeable future. term,” he argued.
Meanwhile, Wells Fargo analyst Steven Cahall in a report on Monday talked about SVB’s “slight fall,” saying: “Of the 29 stocks we cover, Roku is the only issuer (a regulatory filing) on Friday regarding Silicon Valley Bank’s deposits.”
Faced with one of the biggest banking failures since the 2008 financial crisis, the broad-based S&P 500 stock index fell 1.2 percent in early US trading Monday before stabilizing.
The pan-European Stoxx 600 index however fell 2.8 percent at that time, 3 pm Paris time, led by a decline in bank stocks amid concerns of more bank failures. Meanwhile, the German DAX fell 3.3 percent, while in London, the FTSE 100 lost 2.4 percent. Japan’s Nikkei stock index closed up 1.1 percent, while Hong Kong’s Hang Seng index bucked the trend to gain 2.0 percent.
In a sign that investors are looking for safe havens, the price of gold rose. Meanwhile, a key gauge of stock market volatility, the so-called Cboe Volatility Index, hit its highest level since October.
Banking regulators in the US, UK and other countries spent the weekend discussing the best reaction to the quick collapse of Silicon Valley Bank amid fears of contagion hitting other parts of the banking and financial system.
With Silicon Valley Bank (SVB) receiving the Federal Deposit Insurance Corp., an independent agency created by Congress to maintain stability and public confidence in the financial system, any deposits of more than $250,000 that threshold that the FDIC ensures is at risk until the agency numbers how to distribute the bank’s assets.
On Sunday, US regulators took control of a second bank, Signature Bank, known for working with cryptocurrency companies as well as being used in several Broadway productions. The Treasury Department, the Federal Reserve and the FDIC also unveiled emergency measures to ease fears that depositors could pull their money from small lenders. This includes guarantees on all SVB deposits. The Fed and Treasury also said they would use their emergency lending authority to make more funds available and prevent runs on other banks.
In Britain on Monday, banking giant HSBC revealed a deal to acquire SVB UK for £1 ($1.20).
Over the weekend, several early-stage companies wrote to the UK chancellor, or finance minister, Jeremy Hunt, to warn of “an existential threat to the UK technology sector,” Sky reported News. “The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held,” their letter said. “This weekend most of our technology advocates ran the numbers to see if we could be technically disabled. The impact of this is far greater than our individual businesses.” letter concluded that the collapse of the UK arm of SVB “would damage the sector and set the ecosystem back by 20 years.”
MoffettNathanson analysts Craig Moffett and Michael Nathanson in an email over the weekend also addressed SVB’s failure after acquiring the research firm in December 2021.
“We are still here,” they wrote. “We want to assure you that our business continues unabated, and our commitment to delivering the best research remains unwavering.” The MoffettNathanson team added that “our parent company, SVB Securities Holdings, was and is a separate entity that is not directly affected by bank events. While events continue to develop rapidly, we have every expectation of business as usual.
