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FutureStarr@WSJ Update: Silicon Valley Bank CEO Sold $3.6 Million In Shares Days Before Fatal Loss
In what could be seen as a warning, Silicon Valley Bank CEO Greg Becker sold shares worth $3.6 million less than two weeks before the bank's epic collapse. This was part of his trading plan filed with the Securities and Exchange Commission in January.
Greg Becker, the CEO of Silicon Valley Bank (SVB), sold $3.6 million worth of stock days before their company was forced to shut down. Records show he sold 12,451 shares under a trading plan in early February.
At the time Becker sold these shares, SVB was facing serious financial troubles. Its bonds had suffered a dramatic loss in value, making it unprofitable to pay off its debts.
SVB's customers began withdrawing money from the bank. When management informed customers that they must sell part of their bond holdings in order to cover those withdrawals, even more people started taking out money.
On Friday morning, the bank found itself in an untenable situation and it became difficult to see any way out. Ultimately, they were forced to close their doors for good on that day.
SVB's collapse marked the largest failure of a US bank since Washington Mutual's 2008 debacle, and is the second-largest ever for a US retail bank.
Three decades ago, Becker joined Silicon Valley Bank as a loan officer and quickly rose through the ranks until he achieved the position of president and chief executive officer. Later he co-founded SVB Capital - SVB's investment arm - which remains in operation today.
He served as Chairman of TechNet, a premier trade association for the technology industry, from 2014 to 2017. A champion of innovation economy, Becker believes that innovation brings together talented individuals who are driven to transform great ideas into profitable businesses.
Becker has made it his mission to promote diversity and inclusion, promote economic development, and enhance community well-being. Under his guidance, SVB has become a recognized leader in the innovation economy and outpaced other banks' growth rates.
As CEO, Becker has led SVB in providing services to thousands of fast-growing companies and their investors. Under his guidance, SVB has grown into the nation's 14th largest bank, outpacing other banks' growth rates. Furthermore, Becker has prioritized recruiting and retaining top talent to better serve both clients and employees.
SEC filings reveal Silicon Valley Bank CEO Greg Becker sold shares worth $3.6 million two days before the bank collapsed, leading to a 60% drop in stock prices. These sales were done under a trading plan filed in January and reported in the bank's SEC filing on February 27.
After the bank collapse, SEC records indicate that Silicon Valley Bank's parent company, SVB Financial Group, is now in receivership with the Federal Deposit Insurance Corporation taking control. On March 13, its main office and 17 branches will reopen as scheduled; however, customers should expect their insured deposits to be transferred to a new institution, according to the FDIC.
SVB's move comes as they struggle to contain losses on their bond portfolio due to rising interest rates. This mismatch has left SVB with significant asset and liability imbalances.
According to Karl Schamotta, chief market strategist at Corpay, one of the greatest challenges facing SVB and many other US banks is understanding and mitigating vulnerabilities within the entire banking sector.
According to The Financial Times (FT), the bank's troubles stem from its inability to properly balance out its cash flows with short-term liabilities. It experienced a major surge of venture capital funding during the tech boom but then found itself unable to grant loans at the same pace it took in cash.
Due to this, SVB invested much of its assets into long-term securities such as mortgage bonds and US Treasury bills. Unfortunately, the Fed began raising interest rates aggressively, driving up SVB's debt costs.
When this occurred, it made the bank's depositors anxious and caused a gradual outflow of funds, creating a liquidity crisis. As a result, SVB's bondholders suffered substantial losses on their holdings, while customers began pressing for withdrawals of their money.
SVB and other large banks have faced an array of difficulties as a result of the global central bank's campaign to combat inflation. The recent increase in borrowing costs has made it harder for them to contain losses on their treasury holdings, prompting them to search for alternative sources of capital.
After a week of turbulent events, shares in Silicon Valley Bank experienced an unprecedented decline, dropping by double digits. This came only hours after SVB announced it would raise more than $2 billion in equity and one day after the Federal Reserve started raising interest rates.
One of the greatest concerns for SVB is the substantial losses on its bond portfolio. Like many other banks, it had taken in tens of billions from venture capital clients and then invested that cash into longer-term bonds - seemingly falling into a trap.
This trap is easy to spot: As the Fed raises interest rates, the value of SVB's bonds drops. This could cause panic among depositors and reduce a bank's liquidity. In order to pay off those deposits, however, they must sell those bonds.
But the bank's CEO, Greg Becker, was certain his bonds would be worth more when it came time to redeem them. So he sold $3.6 million worth of shares just weeks before the devastating loss on Friday, according to regulatory filings.
According to SVB's most recent Form 10-Q, this sale marked his first since becoming CEO. Prior to that time, he had been actively buying shares.
Uncertainty remains as to if this strategy was meant to safeguard the bank from disaster or not, but it certainly wasn't one that worked. SVB's executives must answer why they allowed SVB into this predicament that has already put millions of people out of work.
Ultimately, Wall Street's gamble turned into the worst financial crisis since the Great Depression. Similar to Lehman Brothers, global financial systems crumbled as a result of panic on Wall Street.
SVB, the second-largest bank failure in history after Washington Mutual in 2008, fell apart after just 44 hours when its long-standing customer base of tech startups withdrew their deposits. But SVB's demise serves as a warning of the risks facing banking sector.
According to Securities and Exchange Commission filings, the CEO and CFO of Silicon Valley Bank sold $3.6 million worth of shares two days before it suffered a devastating loss from selling part of its investment portfolio, according to SEC records. These sales were conducted under an authorized corporate trading plan established by the SEC to prevent insider trading; however, it remains uncertain whether Becker and Beck knew that their firm would fail within two weeks.
Recently, customers of the tech sector began withdrawing money due to interest rate hikes. That necessitated selling part of its bond holdings earlier this week, sending shares soaring and prompting government intervention on Friday.
SVB clients had deposits far exceeding $250,000, meaning they weren't insured by the FDIC. That's why so many in Silicon Valley and other start-up hubs raced to take their money out of SVB.
These withdrawals pushed Silicon Valley Bank's share price so low that it became a speculative trading bubble, sparking investor panic and prompting regulators to shut the firm down. By midday on Friday, the Federal Deposit Insurance Corporation had taken control of Silicon Valley Bank and confiscated all insured deposits.
Investors were left uncertain how much their investments in SVB were worth after its share prices plunged more than 60% within 24 hours. Some analysts declared the stock a poor buy, while others predicted disaster for the bank.
Although this question can be challenging to answer, it's essential to comprehend how stock values work. A share's value is determined by its marketability and future earnings potential; these two elements can fluctuate drastically over time, so be aware of how they influence your investments.
When the value of a stock is low, it could be an excellent opportunity to purchase it. On the contrary, when shares reach their peak valuation, it could indicate overvaluation and be wise to sell them off.
How much your shares are worth depends on several factors. One way is comparing their market value with their cost basis, which is how much you paid for them. To do this, look for trade confirmations showing exact costs or keep track of dividends and non-dividend distributions received since these can also impact a share's cost basis.