SVB, short for Silicon Valley bank, created shockwaves in the markets last week after selling its $21b bond portfolio at a loss. Depositors responded by removing assets from the bank en-masse, initiating a classic bank run as rumors of the bank\u2019s insolvency spread over social media. Popular gaming platform, Roblox, announced they were unsuccessful in withdrawing $150m of company funds before the bank collapsed. What happened with SVB to cause its implosion?<\/p>\n
What happened with SVB?<\/strong><\/span><\/h2>\nSVB is a huge part of the US tech industry. The California-based lender specializes in providing banking services for tech companies of all sizes, from startups to late-stage publicly traded corporations. Before this week, the bank held $209b of funds under management. They were the 15th largest bank in the country and the 2nd largest bank in US history to fail, second only to Washington Mutual failing during the Great Financial Crisis of 2008.<\/p>\n
Like many other banks, SVB took in more deposits than it could lend out during the covid-19 pandemic. The bank responded by buying US Treasuries. After the Federal Reserve hiked interest rates to combat inflation in 2022-2023, however, the value of SVB\u2019s US Treasuries plummeted.<\/p>\n
After exiting their bond investments at a loss and unsuccessfully raising capital by selling company shares, many large depositors withdrew money from the bank. Word quickly spread throughout the close-knit tech community and created a snowball effect. SVB did not have enough liquidity on hand to process the amount of withdrawal requests, and eventually, regulators stepped in to shut the bank down.<\/p>\n
\u00a0<\/p>\n![\"Customers](\"https:\/\/nftevening.com\/wp-content\/uploads\/2023\/03\/Capture-9.jpg\")
\n<\/picture>\n<\/noscript><\/a>Lines of worried customers stretched out the door of SVB headquarters in Santa Clara amidst a bank run
Image Credit: AFP, Noah Berger<\/figcaption><\/figure>\nSince then, the Treasury Dept, FDIC, and Federal Reserve issued a joint statement<\/a> promising the use of government funds to guarantee depositor funds.<\/p>\nHow does this impact Roblox?<\/strong><\/span><\/h2>\nRoblox holds $150m of capital with SVB. On Friday, Roblox announced, \u201cOf Roblox Corporation\u2019s $3 billion of cash and securities balance as of February 28, 2023, approximately 5% is held at Silicon Valley Bank.\u00a0 Thus, regardless of the ultimate outcome and the timing, this situation will have no impact on the day to day operations of the Company.\u201d<\/p>\n
Good news for the gaming giant and metaverse<\/a> builder. Roblox shares are up 10% from Friday morning, clearly demonstrating the lack of concern about the company\u2019s financial wellbeing moving forward.<\/p>\nThanks to the government intervention to protect depositor accounts, Roblox will be able to recover all $150m of its company funds held with SVB.<\/p>\n![\"Roblox](\"https:\/\/nftevening.com\/wp-content\/uploads\/2023\/03\/d66ae37d46e00a1ecacfe9531986690a.jpg\")
\n<\/picture>\n<\/noscript><\/a>Roblox had $150m of company funds at risk when SVB collapsed
Image Credit: Roblox<\/figcaption><\/figure>\nAre other banks in danger of failing?<\/strong><\/span><\/h2>\nRegional bank stocks dumped heavily in Monday\u2019s early trading session. SVB\u2019s fallout led to 12 different banks having the trading of their stocks halted. President Biden appeared on national television to promise government assistance to the troubled bank sector and pledged to do everything possible to avoid any further contagion risk.<\/p>\n
Bank stocks responded favorably. The stock price of First Regional Bank, for example, skyrocketed over 50%<\/a> on Tuesday after shares dropped more than 75% after the SVB news broke.<\/p>\nAided in part by a favorable CPI print today, it seems like regulators managed to avoid a larger financial disaster.\u00a0 Investors now look towards next week\u2019s Federal Reserve as the next major event to possibly signal an end of the 2022-2023 bear market.<\/p>\n
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\n\n\n\n\n\nJoin Our New “To The Moon” daily Newsletter<\/span><\/h4>\nGet our free, 5 minutes daily newsletter. Join 25,000+ NFT enthusiasts & stay on top \ud83d\udc4a\ud83c\udf1a<\/p>\n<\/div>\n<\/div>\n
\n<\/picture>\n<\/noscript><\/a>Image Credit: AFP, Noah Berger<\/figcaption><\/figure>\n
Since then, the Treasury Dept, FDIC, and Federal Reserve issued a joint statement<\/a> promising the use of government funds to guarantee depositor funds.<\/p>\n Roblox holds $150m of capital with SVB. On Friday, Roblox announced, \u201cOf Roblox Corporation\u2019s $3 billion of cash and securities balance as of February 28, 2023, approximately 5% is held at Silicon Valley Bank.\u00a0 Thus, regardless of the ultimate outcome and the timing, this situation will have no impact on the day to day operations of the Company.\u201d<\/p>\n Good news for the gaming giant and metaverse<\/a> builder. Roblox shares are up 10% from Friday morning, clearly demonstrating the lack of concern about the company\u2019s financial wellbeing moving forward.<\/p>\n Thanks to the government intervention to protect depositor accounts, Roblox will be able to recover all $150m of its company funds held with SVB.<\/p>\n Regional bank stocks dumped heavily in Monday\u2019s early trading session. SVB\u2019s fallout led to 12 different banks having the trading of their stocks halted. President Biden appeared on national television to promise government assistance to the troubled bank sector and pledged to do everything possible to avoid any further contagion risk.<\/p>\n Bank stocks responded favorably. The stock price of First Regional Bank, for example, skyrocketed over 50%<\/a> on Tuesday after shares dropped more than 75% after the SVB news broke.<\/p>\n Aided in part by a favorable CPI print today, it seems like regulators managed to avoid a larger financial disaster.\u00a0 Investors now look towards next week\u2019s Federal Reserve as the next major event to possibly signal an end of the 2022-2023 bear market.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Get our free, 5 minutes daily newsletter. Join 25,000+ NFT enthusiasts & stay on top \ud83d\udc4a\ud83c\udf1a<\/p>\n<\/div>\n<\/div>\nHow does this impact Roblox?<\/strong><\/span><\/h2>\n
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Image Credit: Roblox<\/figcaption><\/figure>\nAre other banks in danger of failing?<\/strong><\/span><\/h2>\n
Join Our New “To The Moon” daily Newsletter<\/span><\/h4>\n