Brian Snyder/Reuters
- Ackman called on the government for a "highly dilutive" Silicon Valley Bank bailout if the private sector doesn't step up.
- The risk of the bank failing could have a domino effect on the rest of the banking sector, he said.
- SVB is a go-to bank and lender to startups in the tech sector and a crucial part of the ecosystem.
Billionaire investor Bill Ackman says the US government should consider a "highly dilutive" bailout of Silicon Valley Bank amid jitters about its financial position.
The bank's failure "could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash," Ackman said in a series of tweets on Thursday. "If private capital can't provide a solution, a highly dilutive gov't preferred bailout should be considered," he said.
—Bill Ackman (@BillAckman) March 10, 2023
Ackman, the founder and CEO of hedge fund Pershing Square Capital Management, said a bailout for the bank should protect depositors rather than equity holders or its management. "We should not reward poor risk management or protect shareholders from risks they knowingly assumed," he said.
He further said that "the risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why gov't intervention should be considered."
—Bill Ackman (@BillAckman) March 10, 2023
Ackman's tweets had been viewed 1.2 million times in their first five hours online.
On Thursday, the SVB Financial Group-owned bank's share price tanked by over 60% to $106.04 after it said it was facing a $1.8 billion loss due to a $21 billion firesale of its bond portfolio. To cover losses, SVB wants to raise $2.25 billion by selling stock and issuing related securities.
The bank's in damage-control mode now. Greg Becker, the CEO of Silicon Valley Bank, told clients to "stay calm" at a conference call on Thursday, Bloomberg reported, citing a person familiar with the matter.
The events spurred concerns among tech VCs and founders about Silicon Valley Bank's financial stability. Some notable VC firms advised their portfolio companies to withdraw their funds, which in turn, increased the risk of a bank run. In the worst-case scenario, this could leave the bank with too little cash for its operations.
SVB Financial Group shares extended losses on after-hours trade, falling 22% to $82.50 apiece. The stock is down 54% so far this year.
Silicon Valley Bank did not immediately respond to Insider's request for comment sent outside regular business hours.