SVB Financial in Santa Clara, Calif., saw its shares tumble after disclosing plans to raise capital after selling a large amount of its bond portfolio at a loss.
The $212 billion-asset company said in a press release that it sold about $21 billion of securities at a roughly $1.8 billion loss, or “substantially” all of its available-for-sale securities. SVB’s stock fell by more than 60% on Thursday.
SVB said in a letter to investors that it plans to reinvest any proceeds from the securities sale into “a more asset-sensitive, short-term AFS portfolio.”
The company also plans to sell nearly $1.3 billion of common stock and $500 million of depositary shares. Underwriters will have the option to sell another $187.5 million of common stock and $75 million of depositary shares.
SVB announced a $500 million commitment from investment firm General Atlantic.
SVB’s tech clients have been burning through cash, leading to deposit outflows and forcing the company to sell underwater bonds to boost liquidity.
SVB also doubled its term borrowings to $30 billion from $15 billion at the end of 2023.
The actions will “better support earnings in a higher-for-longer rate environment,” SVB said in a letter to investors.
SVB had more than $91 billion of bonds at Dec. 31, with most marked as “held-to-maturity.”