The collapse of Silicon Valley Bank was a “Lehman moment” for the expertise business, in response to a high Goldman Sachs deal-maker.
Cliff Marriott, co-head of expertise, media and telecoms in Europe for the funding banking division of Goldman Sachs, mentioned that the March 10 shutdown of SVB was “pretty stressful,” because the lender’s clientele scrambled to determine how they’d make payroll.
“That first weekend was a little bit like the Lehman moment for technology and it was really more operational for those companies,” Marriott informed CNBC’s Arjun Kharpal in an interview at a Goldman Sachs tech symposium that aired Tuesday on “Squawk Box Europe.”
“They needed access to capital. A lot of their balances were on SVB. And, secondly, SVB was propelling and making a lot of their payments for payroll to pay their employees.”
Founded in 1983, SVB was thought-about a dependable supply of funding for tech startups and enterprise capital companies. A subsidiary of SVB Financial Group, the California-based industrial lender was, at one level, the Sixteenth-biggest financial institution within the U.S. and the biggest in Silicon Valley by deposits.
SVB was taken over by the U.S. authorities after its clientele of enterprise capitalists and tech startups withdrew billions from their accounts. Many VCs had suggested portfolio firms to drag funds on the again of fears that the lender could crumble.
SVB Financial Group’s holdings — belongings resembling U.S. Treasury payments and government-backed mortgage securities that had been considered as protected — had been hit by the Fed’s aggressive rate of interest hikes, and their worth dropped dramatically.
Earlier this month, the agency revealed it had bought $21 billion value of its securities at a roughly $1.8 billion loss and mentioned it wanted to boost $2.25 billion to fulfill shoppers’ withdrawal wants and fund new lending.
The way forward for SVB stays unsure, although deposits had been in the end backstopped by the federal government and SVB’s government-appointed CEO tried to reassure shoppers the financial institution remained open for business.
Marriott mentioned there may be “still a big question mark regarding what bank or firm or set of firms is going to replace SVB in terms of providing those utility-like services for technology, giving them bank accounts, allowing them to make payroll, holding their cash balances.”
The SVB collapse has additionally raised questions over the potential penalties for different banks, with SVB being removed from the one lender that has come below pressure. Swiss funding banking titan Credit Suisse was rescued by its predominant rival UBS in a government-backed, cut-price deal final week.
Marriott additionally addressed tech IPOs and their outlook for 2023. Europe’s tech preliminary public providing market has been largely closed on account of a confluence of market pressures, together with increased rates of interest, which make the long run cashflows of high-growth tech firms much less enticing.
Marriott mentioned he would have been extra optimistic a couple of restoration in tech IPO exercise two weeks in the past.
“I’m still hopeful that we’ll see tech IPO activity in 2023. And if we don’t, I think 2024 will be a big year for tech IPOs,” Marriott mentioned.
“I think what we’ll see is the more established profitable companies come first, so the easier-to-understand business models, profitable companies, before we see the really highly valued profit or negative profit companies that we saw in 2021.”
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Source: www.cnbc.com