Swathes of London-listed tech companies rushed to reassure investors on Monday morning after it was confirmed that HSBC would buy the UK branch of bankrupt Silicon Valley Bank.
The £1 deal facilitated by the Government and the Bank of England means that all customer deposits have been protected, while the lender’s customers will be able to access their cash and banking services as normal from today today.
HSBC Group boss Noel Quinn told investors the deal made ‘great strategic sense for our UK business, adding that SBV UK customers can be ‘safe in the knowledge that their deposits are backed by the strength, safety and security” of the banking giant. .
SBV was a key bank for many tech companies now struggling to understand their exposure
The collapse of its parent company was triggered after the tech investor crystallized a loss of $1.8bn (£1.5bn) on a bond portfolio valued at $21bn, scaring thus investors and customers and triggering a run on the bank.
Head of Investments at Interactive Investor Victoria Scholar said: “The tech lender took an interest rate position last year and miscalculated the expected level of Fed rate hikes, dragging the lender with heavy losses.
“On top of that, the rising cost of funding and the volatility in the financial markets that caused a dearth of IPOs made life harder for many of SVB’s tech start-up clients, who started pulling deposits, putting pressure on SVB.”
The UK government has moved to limit the fallout from the crisis at SVB, which threatens to destabilize large swaths of the UK tech sector.
HSBC said SVB UK has loans of around £5.5bn and deposits of around £6.7bn, and its tangible equity is expected to be around £1.4bn .
The bank added: “The final calculation of the gain resulting from the acquisition will be provided in due course. The assets and liabilities of SVB UK’s parent companies are excluded from the transaction.’
SBV UK made pre-tax profits of £88 million as of December 31.
Concerns over the impact of SBV’s collapse on Britain’s tech sector sparked a flurry of updates on the London Stock Exchange on Monday as groups tried to reassure investors.
Polarean Imaging has been forced to request that trading in its common stock on AIM be temporarily suspended “while it seeks clarification” of its exposure to SVB’s demise.
The medical technology company said it had a total cash balance of $13.9 million as of February 28, 2023, including $12.4 million held through SVB, of which $9.8 million dollars held in money market mutual fund accounts managed by other financial institutions. He has $1.5 million in cash at Wells Fargo.
“In addition, the company has $1 million in an SVB current account and $1.6 million in an SVB current account in sterling. The United States Federal Deposit Insurance Corporation guarantees $250,000 of deposits in the United States.
Naked Wines said it did not expect to suffer a loss following the bankruptcy of SVB, with which it had bet on the bank, adding that it had ‘solid liquidity’ of £32million in raw cash.
Group chief executive Nick Devlin said: “We are announcing today that day-to-day operations are unaffected and we do not expect to incur any loss as a result.”
“While this situation remains fluid, we maintain a strong balance sheet with around £185m of equity and £17m of cash immediately available.”
AIM-listed RWS Group said it “believes” it has “limited exposure to SVB”, reiterating the outlook provided in its recent statement to the annual general meeting as the company continues to expect to generate adjusted pre-tax earnings for the full year in line with market expectations.
He added: “The group remains well placed to continue to execute on its strategy with the added benefit of a strong balance sheet, having net cash of £71.9 million at 30 September 2022.”
This will be extremely welcomed by the government, given that the impending crisis is likely to overshadow budget day.
Susannah Streeter, Hargreaves Lansdown
Chief executive of pharmaceutical technology provider Diaceutics, Peter Keeling, said: “We are working quickly to ensure the financial resilience of the business, in the face of these unprecedented events.”
“We continue to maintain strong business relationships, expanding our customer relationships while growing our extensive pipeline of new business opportunities and a strong order and receivables backlog. We hope to be able to lift the suspension of our shares as soon as our funding position is secured.
Meanwhile, THG, Cornerstone FS, Auction Technology Group and Science Group were among the companies to say they had no material exposure to the bank.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the takeover of SBV UK by HSBC “should put an end to the nightmare thousands of tech companies have had in recent days”.
She added: ‘This will be extremely welcomed by the government, given that the impending crisis risked overshadowing budget day, as a big bailout of the tech sector would not have been a good look when millions of people were informed that there was little additional money to alleviate the cost-crisis of living.
“SVB was seen as the lifeblood of the tech industry, providing facilities for start-ups that were hard to access elsewhere in the market, so although the immediate liquidity nightmare looks set to be lifted, Concerns will persist about future banking options.”
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