- Silicon Valley Bank was taken into receivership by the FDIC over the weekend after a run on the bank.
- The bank had about $209 billion in total assets and only about $175 billion in assets, leaving a $34 billion shortfall.
- The bank has various other businesses that the FDIC is auctioning off and anticipates final status of those businesses within days.
- Uninsured depositors, at first glance, will recover at a minimum 80% of their funds, but 100% is fairly likely, meaning company’s share prices are likely to recover too.
- Silicon Valley Bank shares will be massively diluted or go to zero.
There is a lot of breathiness about Silicon Valley Bank (SIVB) collapsing due to a run on the bank and being taken over by the FDIC. I would caution those thinking “Lehman Brothers” all over again to switch to something decaffeinated.
As Former FDIC Chair Sheila Bair explained: “This is a $200B bank in a $23T banking industry. I think it’s going to be hard to say that this is systemic in any way.” Silicon Valley is about 8/10ths of 1% of the banking system.
In other words, this is not Lehman. It’s probably more a “Bear Stearns Lite” moment. That is, a harbinger of things that could come, if interest rates and quantitative tightening don’t run their course sooner than later from here.
I have more to say about what we will likely see in the banking system, monetary policy and real estate the next year or two, but today, I’m focusing on the stocks impacted by Silicon Valley Bank’s failure.
Stocks On Our “Very Short Lists”
We have almost 200 stocks that we follow broken into different categories:
- S&P 500 Growth Stocks – about 20 stocks.
- S&P 500 Dividend Stocks – about 30 stocks.
- Mega Caps – the rest of the stocks over $200 billion.
- Non S&P 500 Dividend Stocks, including REITs, Utilities, Listed Private Equity, BDCs, etc… – about 30 stocks.
- Mid Cap growth stocks – about 20 stocks.
- Small Cap growth stocks – about 20 stocks.
- International stocks – about 20 stocks.
Here are the VSL stocks (SO FAR) that we know had uninsured deposits at Silicon Valley Bank. Many are suffering corrections.
- Roku (ROKU) has been a company we traded a couple years back and I have warned against for well over a year. It held about a quarter of its cash at SVB or $487 million. This might finally get the stock to bottom out which would make it interesting to me.
- Rocket Lab (RKLB) holds about 8% or $38 million at SVB. We have sold puts on this one before. I like the company’s business a lot long-term. This is probably a spot to at least sell puts and take a starter.
- Roblox (RBLX) has 5% of its cash at SVB and is a competitor to holding Unity (U). This could be a spot to pair the holdings together as they are both leaders in the AI, 3D, AR, VR & Metaverse space.
- Ginko Bioworks (DNA) held about 6% of their cash reserves at SVB. What else could drive their stock price down? I think aliens are all that is left. If you don’t own DNA, get a starter here.
- SunRun (RUN) is a company we have waited a long time to try to buy. It might be time. They have 15% of their cash at SVB, about $80 million.
Of note, the alternative energy ETFs took a hit Friday. I had a limit order for the Invesco WilderHill Clean Energy ETF (PBW) set at $39 to get a starter position and it was triggered.
I’ve been waiting to see if ARK Innovation (ARKK) dipped under $30 again as I suspect it will and it dropped a bit over 3%, but still is at $36.
