Semafor reported on Saturday that hedge funds are making offers to buy the stranded startup deposits at Silicon Valley Bank (SVB) for as low as 60 cents on the dollar, according to sources familiar with the matter.
The bid range of 60 to 80 cents reflects the expectations for the eventual recovery of uninsured deposits once the bank’s assets are sold or liquidated. After SVB’s seizure by the Federal Deposit Insurance Corp (FDIC), firms such as Oaktree, known for investing in distressed debt, are reaching out to startups.
The Information reported separately that Jefferies investment firm traders are also approaching startup founders with money stuck in the bank, offering to purchase their deposit claims at a discount.
The report cited multiple individuals with direct knowledge of the matter, noting that Jefferies is offering at least 70 cents on the dollar for deposit claims.
Oaktree, a firm known for investing in distressed debt, has declined to comment on reports that hedge funds are offering to buy startup deposits at a discount from Silicon Valley Bank (SVB) after the bank’s collapse.
Meanwhile, investment firm Jefferies, which is reportedly contacting startup founders with deposits at the bank, has not yet provided a comment on the matter.
The run on the bank by depositors, who were concerned about the lender’s financial stability, led to its collapse and wiped out over $100 billion in market value for US banks, catching observers off guard and causing a shock in the market.
Impact of Silicon Valley Bank collapse
The impact of the Silicon Valley Bank collapse will unfold potential implications for startups and investors, particularly those who have deposits with the bank. The collapse of a major lender like Silicon Valley Bank could also send shockwaves through the wider financial sector, as it did during the 2008 financial crisis.
The FDIC’s seizure of the bank raises questions about the strength and stability of other banks, particularly those that may have similar exposure to startup lending.
The collapse of Silicon Valley Bank could also affect the confidence of investors and startup founders in the US financial system, particularly if they fear that their deposits may not be fully insured. This could lead to a slowdown in investment and innovation in the startup sector.
US regulators have expressed confidence in the financial system’s ability to respond to the bank’s failure, and have highlighted the resilience and effectiveness of banking regulators and the tools they have at their disposal. This may help to alleviate concerns and prevent wider panic in the financial markets.
Ultimately, the full impact of the Silicon Valley Bank collapse on the US economy and financial system remains to be seen and will depend on how the situation is resolved.