Short sellers make $500 mn on Silicon Valley Bank’s downfall: Report
1 min read . Updated: 11 Mar 2023, 06:29 PM IST
Premium- The stock of SVB plunged by nearly 60 per cent on Thursday over concerns on the bank’s operation, netting traders who bet against the stock a one-day mark-to-market profit of roughly $513 million, reported Bloomberg.
SVB Financial Group’s record plunge on Thursday minted short sellers roughly half a billion dollars in paper profits.
However, they now face a challenge: how to close their positions.
The stock of SVB plunged by nearly 60 per cent on Thursday over concerns on the bank’s operation, netting traders who bet against the stock a one-day mark-to-market profit of roughly $513 million, reported Bloomberg.
The stock fell another 63 per cent in premarket trading Friday before being halted, with the Federal Deposit Insurance Corp. ultimately announcing that it had seized the bank.
“SIVB’s closure gives short sellers a windfall profit, but now they have to go through the sometimes-difficult process of liquidating their positions and realizing their mark-to-market profits," said S3 Partners head of predictive analytics Ihor Dusaniwsky, reported Bloomberg.
“With stock borrow financing costs accruing daily, even on weekends, even though trading is halted there is a continuous reduction of profits until short sellers close out their positions and return their borrowed shares."
The SVB collapse comes just a day after crypto-friendly bank Silvergate Capital Corp.’s announcement that it would liquidate and voluntarily wind down operations of its bank. That too minted bets against that heavily-shorted stock a sizeable windfall, although unlike SVB, its shares are still trading.
Investors and depositors tried to pull $42 billion from Silicon Valley Bank on Thursday in one of the biggest US bank runs in more than a decade, according to a Friday regulatory filing.
At the close of business on March 9, the bank had a negative cash balance of $958 million, according to an order taking possession of the bank filed Friday by California’s bank regulator, the Department of Financial Protection and Innovation.
While, Silicon Valley Bank Chief Executive Officer Greg Becker sold $3.6 million of company stock under a trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.
(with inputs from agencies)