|
|
|
|
|
|
by blindriver
1191 days ago
|
|
|
You didn't do your research. They sold their AFS securities because Moody's was threatening to downgrade them, and they were forced to act. That's why everything happened so quickly, Moody's was going to downgrade them, which forced SVB to make a bunch of deals in order to not only short up their finances but try to get investors to inject liquidity. They didn't have enough time to seal the deal before announcing it, and all the investors pulled out after the reaction to the announcement. |
|
|
Ah I was missing that part of the story. It turns out that SVB hired Goldman Sachs to advise them on this crazy plan and all to turn a 2 notch downgrade by Moody's into a 1 notch downgrade. Supposedly they were so rushed by Moody's that they couldn't even close the equity raise before announcing it (which is batshit crazy for a company with a public stock price to do while trying to avoid a credit downgrade). I'm not sure why SVB was surprised and caught off guard by Moody's - shouldn't they have been in communication with Moody's all along the way? Not sure what to think about Goldman's involvement, are they incompetent too?
But of all this just makes me agree even more with the employee quoted in the article. If you are facing these kinds of problems as a bank CEO, get on a plane to the Middle East and get a Sovereign Wealth Fund to close your funding gap, instead of publicly announcing that you'll raise equity just to satisfy a Moody's rating analyst. Because, as we now know, your stock will crater, your new equity investor will walk away, and your customers will start a run on your bank, and by Monday you will have lost your shirt.