The collapse of the US “Silicon Valley” bank has raised great concerns regarding the position of technology companies, which have become facing a “serious danger” regarding the repercussions of the current crisis, at a time when the United States is working vigorously to limit the damage.
context of events
All eyes quickly turned to the many Silicon Valley-backed companies, most of them in the technology sector, as concerns grew regarding whether they would be able to recover their money and pay their employees..
According to Bloomberg, Silicon Valley Bank has always described itself as “a comprehensive ecosystem for tech visionaries,” more than just a bank, and a “financial partner through loans and currency management.”.
The importance of the bank
- Silicon Valley Bank is the world’s largest lender to technology startups, specializing in early-stage business lending, and collecting nearly half of the US-backed technology and healthcare companies that listed on the stock markets last year..
Silicon Valley Bank… The story of a giant’s fall in 72 hours
“violent” methods
Analysts considered the methods implemented by the bank over the past years “violent”, but in view of the results achieved, business with 44 percent of the technology and health care companies supported by US companies that were offered for the last public offering, has achieved growth in general..
This comes in conjunction with the European stock exchanges continuing their decline on Monday, recording the worst session of the year due to fears of the spread of contagion to the banking sector, following the bankruptcy of two US banks.
The share price of the American “First Republic” bank also fell by more than 65 percent, with the start of trading on “Wall Street”, which led to a decline in the shares of other banks..
Traders’ reaction
And the financial and economic analyst, Ahmed Ezz, believes in exclusive statements to “Sky News Arabia” website, that “technology stock traders will tend to sell shares, and then the distribution of portfolios will change, so that most of them will be in emerging companies with a fair price corrected following the collapse.”.
And he adds, “The same thing will apply to traders in banks that invest or lend a large percentage in emerging companies operating in the field of technology, and who will also go to sell,” referring to the fact that those banks, even if they were not affected by the crisis, would be “forced to commit to high reserves, To maintain a relative weight of risks, in accordance with international and local laws..
It owns private equity firms, among them “Vista Equity Partners” And“Insight Partners” And“Thomas Bravo” Dozens of portfolio companies that do business with Silicon Valley Bank“.
This bank has been the institution of choice for start-ups backed by leading investment firms.
cause of bankruptcy
Ezz explains that the bankruptcy of “Silicon Valley” is the result of “a crisis in liquidity management, and not due to poor testing or evaluation of companies operating in the technology sector,” noting that these subsidiaries “will, of course, be affected by the bankruptcy of these banks.”.
And he continues: “The problem is not with the companies, but with the banks. It is important for traders in the shares of companies operating in the technology sector to study the extent of the impact of the crisis on each specific company.”“.
Companies supported by Silicon Valley
- Roku: It is an American technology company that designs video streaming devices and smart TV, and develops multimedia software. It has regarding $487 million of the $1.9 billion in Silicon Valley Bank, or regarding 26 percent of its money..
- BlockFi, a financial services company that provides cryptocurrency-backed loans, has $227 million in a Silicon Valley bank, according to its bankruptcy filing..
