(SIVB) SVB Financial Group was shorted very bad today, but what do the technicals say now? Well actually there may be a dead cat bounce back up to its long-term horizontal channel once the smoke clears. Kudus to anyone that had puts over last night. I was looking at the 3/17 expiry puts that show outlandish profit gains like the $230 put for +19,184%. Yesterday the $230 put was $65 and today it closed at $12,400! Unfortunately, I had no short position, but it was amazing to watch. No sense chasing a drop like this, if anything I'd want to take the contrarian long position at this point or do nothing, so I will be watching how this unfolds.
3/17 expiry options data:
Put Volume Total 24,197
Call Volume Total 23,193
Put/Call Volume Ratio 1.04
Put Open Interest Total 3,020
Call Open Interest Total 2,248
Put/Call Open Interest Ratio 1.34
4/21 expiry options data:
Put Volume Total 4,520
Call Volume Total 14,099
Put/Call Volume Ratio 0.32
Put Open Interest Total 2,252
Call Open Interest Total 1,547
Put/Call Open Interest Ratio 1.46
5/19 expiry options data:
Put Volume Total 6,022
Call Volume Total 2,339
Put/Call Volume Ratio 2.57
Put Open Interest Total 5,446
Call Open Interest Total 4,583
Put/Call Open Interest Ratio 1.19
March 9 (Reuters) - SVB Financial Group (SIVB) shares plunged more than 62% on Thursday, a day after the lender launched a $1.75 billion share sale to shore up its balance sheet and navigate declining deposits from startups struggling for funds amid increased spending.
The shares posted their biggest loss in 25 years as the bank said venture capital funding could remain constrained in the near term, while Chief Executive Greg Becker said cash burn by clients increased in February.
Becker has been calling clients to assure them that their money with the bank is safe, according to two people familiar with the matter. Some startups have been advising their founders to pull out their money from SVB as a precautionary measure, the sources added.
A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of U.S. venture-backed technology and healthcare companies that listed on stock markets in 2022.
"While VC (venture capital) deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted," Becker said in a letter to investors.
The funding winter is a fallout of a relentless increase in borrowing costs by the Federal Reserve over the last year as well as elevated inflation.
At one point during trading on Thursday SVB's stock fell almost 63%, hitting its lowest level since August 2016, after the lender slashed its 2023 outlook and launched the share sale.
The SVB turmoil raised investors' concerns about broader risks in the sector.
Shares of First Republic (FRC.N), a San Fransisco-based bank, sank more than 16.5% after hitting its lowest level since October 2020, becoming the second-biggest decliner in the S&P 500 index. Zion Bancorp (ZION.O) dropped more than 12% and the SPDR S&P regional banking ETF (KRE.P) slid 8% after hitting its lowest point since January 2021.
Major U.S. banks were also hit, with Wells Fargo & Co (WFC.N) down 6%, JPMorgan Chase & Co (JPM.N) down 5.4%, Bank of America Corp (BAC.N) 6% lower and Citigroup Inc (C.N) 4% lower.
Thursday's slump evaporated over $80 billion in stock market value from the 18 banks making up the S&P 500 banks index (.SPXBK), including a $22 billion drop in the value of JPMorgan.
In a separate deal, SVB said private equity firm General Atlantic will buy $500 million worth of its shares.
Meanwhile, ratings agency Moody's downgraded the bank's long-term local currency bank deposit.
Natalie Trevithick, head of investment grade credit strategy at investment adviser Payden & Rygel, said the bank's bonds were not doing as poorly as the equity.
"Future performance is going to be news dependent but I don't expect them to properly recover in the near term. It's not quite cheap enough for a lot of buy-the-dip people to come back in," Trevithick said.
Despite the latest concerns, analysts at brokerage firm Wedbush Securities said the bank had received significant proceeds from selling securities and raising capital.
"We do not believe that SIVB is in a liquidity crisis," Wedbush analyst David Chiaverini said in a report, referring to the company's trading symbol.
California-based SVB has sold $21 billion of its securities portfolio, which would result in an after-tax loss of $1.8 billion in the first quarter.
Funds raised from the sale will be re-invested in shorter-term debt and the bank will double its term borrowing to $30 billion.
"We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients," Becker said.
"When we see a return to balance between venture investment and cash burn – we will be well positioned to accelerate growth and profitability," he said, noting SVB is "well capitalized".
The bank also forecast a "mid-thirties" percentage decline in net interest income this year, larger than the "high teens" drop it forecast seven weeks earlier.
Bank stocks remained under pressure from "risk-off sentiment" and questions about systemic risks to the industry, said John Luke Tyner, a fixed income analyst at Aptus Capital Advisors in Fairhope, Alabama.
3/17 expiry options data:
Put Volume Total 24,197
Call Volume Total 23,193
Put/Call Volume Ratio 1.04
Put Open Interest Total 3,020
Call Open Interest Total 2,248
Put/Call Open Interest Ratio 1.34
4/21 expiry options data:
Put Volume Total 4,520
Call Volume Total 14,099
Put/Call Volume Ratio 0.32
Put Open Interest Total 2,252
Call Open Interest Total 1,547
Put/Call Open Interest Ratio 1.46
5/19 expiry options data:
Put Volume Total 6,022
Call Volume Total 2,339
Put/Call Volume Ratio 2.57
Put Open Interest Total 5,446
Call Open Interest Total 4,583
Put/Call Open Interest Ratio 1.19
March 9 (Reuters) - SVB Financial Group (SIVB) shares plunged more than 62% on Thursday, a day after the lender launched a $1.75 billion share sale to shore up its balance sheet and navigate declining deposits from startups struggling for funds amid increased spending.
The shares posted their biggest loss in 25 years as the bank said venture capital funding could remain constrained in the near term, while Chief Executive Greg Becker said cash burn by clients increased in February.
Becker has been calling clients to assure them that their money with the bank is safe, according to two people familiar with the matter. Some startups have been advising their founders to pull out their money from SVB as a precautionary measure, the sources added.
A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of U.S. venture-backed technology and healthcare companies that listed on stock markets in 2022.
"While VC (venture capital) deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted," Becker said in a letter to investors.
The funding winter is a fallout of a relentless increase in borrowing costs by the Federal Reserve over the last year as well as elevated inflation.
At one point during trading on Thursday SVB's stock fell almost 63%, hitting its lowest level since August 2016, after the lender slashed its 2023 outlook and launched the share sale.
The SVB turmoil raised investors' concerns about broader risks in the sector.
Shares of First Republic (FRC.N), a San Fransisco-based bank, sank more than 16.5% after hitting its lowest level since October 2020, becoming the second-biggest decliner in the S&P 500 index. Zion Bancorp (ZION.O) dropped more than 12% and the SPDR S&P regional banking ETF (KRE.P) slid 8% after hitting its lowest point since January 2021.
Major U.S. banks were also hit, with Wells Fargo & Co (WFC.N) down 6%, JPMorgan Chase & Co (JPM.N) down 5.4%, Bank of America Corp (BAC.N) 6% lower and Citigroup Inc (C.N) 4% lower.
Thursday's slump evaporated over $80 billion in stock market value from the 18 banks making up the S&P 500 banks index (.SPXBK), including a $22 billion drop in the value of JPMorgan.
In a separate deal, SVB said private equity firm General Atlantic will buy $500 million worth of its shares.
Meanwhile, ratings agency Moody's downgraded the bank's long-term local currency bank deposit.
Natalie Trevithick, head of investment grade credit strategy at investment adviser Payden & Rygel, said the bank's bonds were not doing as poorly as the equity.
"Future performance is going to be news dependent but I don't expect them to properly recover in the near term. It's not quite cheap enough for a lot of buy-the-dip people to come back in," Trevithick said.
Despite the latest concerns, analysts at brokerage firm Wedbush Securities said the bank had received significant proceeds from selling securities and raising capital.
"We do not believe that SIVB is in a liquidity crisis," Wedbush analyst David Chiaverini said in a report, referring to the company's trading symbol.
California-based SVB has sold $21 billion of its securities portfolio, which would result in an after-tax loss of $1.8 billion in the first quarter.
Funds raised from the sale will be re-invested in shorter-term debt and the bank will double its term borrowing to $30 billion.
"We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients," Becker said.
"When we see a return to balance between venture investment and cash burn – we will be well positioned to accelerate growth and profitability," he said, noting SVB is "well capitalized".
The bank also forecast a "mid-thirties" percentage decline in net interest income this year, larger than the "high teens" drop it forecast seven weeks earlier.
Bank stocks remained under pressure from "risk-off sentiment" and questions about systemic risks to the industry, said John Luke Tyner, a fixed income analyst at Aptus Capital Advisors in Fairhope, Alabama.
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SIVB 1 month chart:
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SIVB 2009 to date
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