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FutureStarr@Roku Had $487 Million In Cash At Failed Bank
On Friday, SVB collapsed, forcing a wave of tech companies to disclose that they had money deposited with the failed bank. One notable name among them was streaming device company Roku.
Roku reported $487 million in cash and cash equivalents at SVB, or 26% of its total cash. However, most of its deposits were uninsured.
Roku was among many companies with significant investments at Silicon Valley Bank, which closed down on Friday after being shut down by California's Department of Financial Protection and Innovation. This Santa Clara-based bank had a prominent place in the tech ecosystem with connections to some of its biggest names and as one of the leading financial institutions for tech startups.
On Friday, Roku disclosed that it had $487 million in cash at the bank - approximately 26% of its total amount. The streaming technology company noted that much of this cash was uninsured, though it could not predict how much would be recovered.
It's uncertain what effect this will have on Roku, which manufactures streaming devices as well as licenses its operating system to TV manufacturers such as TCL, Hisense, Sanyo, JVC and Philips. Revenue fell dramatically in the back half of last year and Roku has had to reduce expenses by firing employees.
Steve Louden, who joined Stitch Fix as Chief Financial Officer in 2015, plans to depart for a bigger role at Stitch Fix by 2023. Dan Jedda - currently CFO - will succeed Louden beginning May 1.
Roku faces a major challenge in figuring out how to best move its cash from Silicon Valley Bank to other financial institutions. The streaming technology company currently holds $1.9 billion in cash and cash equivalents, of which $487 million is held by SVB. The rest is spread among various large institutions.
On Friday, Silicon Valley Bank collapsed, sending ripples through the tech world. Many major companies revealed they had money deposited with SVB - including Roku and Roblox, two of the most prominent public tech names. Both firms said they had hundreds of millions of dollars on deposit with SVB but most of it was uninsured.
Roku announced it was moving its operations to Goldman Sachs' California office as it attempted to manage the collapse of SVB. The streaming device company reported having $487 million in cash on deposit at SVB, representing 26% of its overall cash holdings.
Video game platform Roblox reported to the Securities and Exchange Commission ($SEC) that it had $3 billion in cash and securities at SVB, or approximately 5% of its total cash reserves. Nonetheless, this amount wasn't insured and would not affect day-to-day operations at SVB.
Spotify, the streaming music company that already hosts over 2.2 million gaming-related playlists, is expanding its presence on Roblox with "Spotify Island," where they plan to host music events and turn players into creators themselves. Their vision for the island is to turn users into performers by giving them creative control of virtual beat-maker stations and moving around a stage area equipped with objects like confetti cannons and bubbles - an initiative they hope will "flip the script" on artist broadcasting.
Roblox has hosted concerts in the past, such as Lil Nas X and Twenty One Pilots. But with Spotify's arrival on the platform, it will be the first streaming music company to host its own live event.
The launch of the new music experience is part of a larger initiative by streaming music companies to reach younger gamers. A Deloitte survey revealed that more than 80% of people in America play games, and Gen Z gamers were spending an average of 11-13 hours per week playing their favorite titles.
The SVB empire has had a turbulent past, but it ultimately earned the distinction of being America's biggest bank. Unfortunately, this chapter also marked one of America's costliest and disruptive bankruptcies ever, costing at least $17 billion as of press time. Despite massive losses and federal government bailout packages, Silicon Valley managed to retain some stability despite these challenges - in large part thanks to Google - who provided assistance to some former competitors during times of financial difficulty.
Due to SVB's failure, cryptocurrency companies like Roku, Rocket Lab and BlockFi are left vulnerable to losses. These businesses hold cash in SVB which is no longer an insured bank.
BlockFi, which filed for bankruptcy in November following FTX's collapse, has an uninsured balance of $227 million at SVB, according to documents filed Friday. This money is not protected by FDIC coverage because it's held in a money market mutual fund, according to a filing from the U.S. Trustee overseeing its bankruptcy proceedings.
It remains uncertain what caused the crypto firm to file for bankruptcy in the first place, but FTX reportedly provided them with a $250 million loan in June. That loan helped keep the business afloat but also set limits on its value and put it in direct competition with FTX, according to Bloomberg.
In July, FTX extended a line of credit to BlockFi, allowing the firm to draw against that debt. But soon after, news spread about FTX founder Sam Bankman-Fried using customer funds for his crypto trading firm Alameda Research.
Former borrowers contend that BlockFi's due diligence process was flawed, accepting unaudited balance sheets from borrowers without performing a full investigation. They believe this led to the lending of large sums of money to crypto hedge funds and proprietary trading firms with exaggerated assets.
Due to financial difficulties, the lender was unable to fulfill payment obligations on its loan from FTX and defaulted on the entire amount, prompting FTX to terminate its line of credit to BlockFi. With no choice but to take out another loan from FTX in early August, BlockFi did so.
After that, BlockFi slowed withdrawals from its accounts and stopped accepting new deposits. Furthermore, it paid $100 million in penalties to the Securities and Exchange Commission and 32 US states over its BlockFi Interest Accounts, which allowed users to earn returns on cryptocurrency investments.
Last month, the SEC and 32 states issued a joint statement of administrative law judge findings that BlockFi Interest Accounts were unregistered securities and had not been properly registered as an investment company. To address these issues, BlockFi reorganized their risk governance structure, formed an audit and risk committee, laid off around 20% of staff, and agreed to pay $100 million in fines.