Hedge funds are offering to buy startup deposits at Silicon Valley Bank (SVB) for as little as 60 cents on the dollar, Semafor reported on Saturday, citing people familiar with the matter.
Bids range from 60 to 80 cents on the dollar, the report said adding that the range reflects expectations for how much of the uninsured deposits will be eventually recovered once the bank’s assets are sold or wound down.
Firms like Oaktree which are known for investing in distressed debt are contacting startup businesses after SVB’s
seizure by the Federal Deposit Insurance Corp (FDIC), the report said.
Traders from investment bank Jefferies are also contacting startup founders with deposits at the bank, offering to buy their deposit claims at a discount, The Information reported separately.
Jefferies is offering at least 70 cents on the dollar for deposit claims, the report said, citing several people with direct knowledge of the matter.
Oaktree declined to comment on the reports. Jefferies could not be immediately reached for comment.
Silicon Valley Bank was taken over by the U.S. Federal Deposit Insurance Corporation on Friday after depositors, concerned about the lender’s financial health, rushed to withdraw their their deposits. The two-day run on the bank stunned markets, wiping out more than $100 billion in market value for U.S. banks.
See: Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual
Silicon Valley Bank has recently become an unexpected beneficiary of attention paid to it by some of Wall Street’s biggest players. According to MarketWatch, both hedge funds and traditional banks have offered to buy deposits trapped at the Cupertino-based bank, allowing clients to diversify their investments outside of the tech-focused bank.
Silicon Valley Bank has long been seen as the go-to financial institution for tech startups in the Bay Area and beyond. But now, a number of large banks and hedge funds have approached Silicon Valley Bank, looking to buy its deposits. This is a major move for Silicon Valley Bank, as the influx of cash from these large investors could allow them to offer more services and better options for their clients.
Even though this could potentially be a beneficial move for Silicon Valley Bank, it could also have negative repercussions for the existing technology companies that use its services. Specifically, the influx of money from these large institutions could result in an increase in fees for Silicon Valley Bank’s existing clients. This could in turn lead to higher costs for the tech companies that rely on Silicon Valley Bank.
In the end, only time will tell how this all turns out. Silicon Valley Bank could potentially benefit from this influx of attention, but it could also be detrimental to its existing clients. It remains to be seen how the bank will proceed, but one thing is certain — Silicon Valley Bank has become an attractive target for some of Wall Street’s biggest players.