Sunday, March 12, 2023

Silicon Valley Bank

Tomorrow, the FDIC will allow access to Silicon Valley Bank (SVB) accounts up to the insured amount of $250,000. FDIC insurance is something that's not available in the crypto world (just ask SBF and FTX). I'm guessing that all of SVB bank accounts will probably recoup at least 80% of their deposit when the dust settles. This is why billionaires buy many obscenely expensive homes since those investments can be insured to 100%.

Last week, the CEO of SVB sold $3.6 mm in stock as part of a trading plan. I don't think there's much to see with the CEO's stock sales if the cash ended up in SVB, not some other bank. If not, he'll have a tough time explaining that. 

Although I haven't had any personal experience with SVB, a good friend of mind did when he, as CEO of a startup, raised $2.5 mm about 15 years ago. Part of his fund raising deal was that SVB would loan his company $500K provided that all the funds were kept in a SVB account, which he did. In 2009, when times became tough, my buddy's startup had $600K in cash. This wasn't a problem until SVB invoked their MAC clause (material adverse change), swooped in, and pulled his $500K. Unfortunately, the corporation's fellow board members didn't want to fight SVB because they had other deals with the bank. In other words, these directors put their own business interests ahead of the corporations. But what can you do?

My buddy didn't have kind words for SVB when I asked him for comments on Friday. 

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