In a stunning move, the California Department of Financial Protection and Innovation (DFPI) recently shut down the prestigious Silicon Valley Bank (SVB), one of the top financial institutions for the life sciences industry. This swift action has sent shockwaves throughout the biopharma industry, as companies have had to quickly scramble to secure their deposits.
The U.S. regulator has ordered the closure of SVB due to its insufficient liquidity and insolvency. The Federal Deposit Insurance Corporation has been appointed as the receiver for the organization.
SVB announced Wednesday that it is looking to raise $1.75 billion in an underwritten public offering to help cover its $1.8 billion losses from selling its securities. As a result, the bank has decided to close its securities brokerage business, leaving customers searching for new options.
Investors were left in shock Thursday as SVB’s shares took a 60% dive, triggering a bank run. The instability sent SVB’s stock into further decline during pre-market trading Friday before its eventual failure.
The DFPI has announced that the bank will be reopening its doors on Monday, giving customers the chance to access their hard-earned money once again. Get ready to head to the bank and check your balance!
What Will Happen to Biopharma?
SVB is an industry leader when it comes to financial services for the biopharma sector, particularly for early-stage and venture-backed firms. In its FY 2022 financial report, the bank revealed that its average client funds had grown by 14% from the previous year, now standing at a whopping $375 billion.
In 2022, Silicon Valley Bank proved to be a powerful force in the venture-backed tech and life science industries, serving nearly half of these companies in the United States and supporting 44% of the tech and healthcare IPOs. On top of this, average loans provided to these firms rose by 30% to a whopping $70 billion. It’s no surprise that Silicon Valley Bank is the go-to source for companies looking to make a big impact.
As the shock of the bank’s closure ripples through the companies holding deposits there, the FDIC has stepped in to help. All deposits up to $250,000 are insured, while anything beyond that amount is uninsured. To make sure insured depositors have access to their funds, the FDIC has created the Deposit Insurance National Bank of Santa Clara. By Monday morning, those with insured deposits should be able to access their money with no issues.
The FDIC has urged SVB’s customers with sums exceeding the insurance limit to get in touch with the regulator as soon as possible. They have provided a clear directive to ensure that their funds are safeguarded and protected.
The FDIC is offering a special dividend for uninsured depositors in the near future, and a receivership certificate for outstanding deposits. This is a great opportunity for depositors to get the most out of their money and secure their financial future!
The FDIC is offering a unique opportunity to uninsured depositors of Silicon Valley Bank as they are selling the assets of the bank, with potential dividend payments being made in the future. Don’t miss out on this great chance to benefit from the sale!
At the close of 2022, Silicon Valley Bank (SVB) held an impressive $209 billion in total assets and $175.4 billion in deposits. Though the Federal Deposit Insurance Corporation has yet to determine the exact amount of uninsured funds, it’s clear that these impressive figures demonstrate the strength of the bank.
Which Companies Were Affected?
Sangamo Therapeutics revealed on Friday that it had almost $34.4 million on deposit with SVB, almost all of which is uninsured. The company admitted that it was unsure when, or to what extent, it would be able to reclaim the funds, yet it still hopes to remain on track with payroll and other supplier payments.
Protagonist Therapeutics revealed Friday that it had around $13 million held with SVB, despite the bank’s failure. However, the company considers its exposure to the incident as “limited,” since it has a total of $218 million in third-party investments held with various institutions.
Eiger BioPharmaceuticals, Inc. was unfortunately caught in the turmoil of the SVB fallout, with a staggering $8.3 million in bank cash deposits impacted. This amounted to 6.9% of the company’s entire cash, cash equivalents and short-term securities! Thankfully, the company is taking all the necessary measures to preserve their deposits in the wake of this event.
Axsome Therapeutics and Veracyte have both reported exposure to SVB’s failure, but they remain confident that its impact will be insignificant. They are confident that any consequences will be minimal.