SVB Financial Group
|Company Name||SVB Financial Group|
|Class Period||April 16, 2021 to March 10, 2023|
|Lead Plaintiff Motion Deadline||May 12, 2023|
On March 8, 2023, SVB announced that it intends to raise more than $2 billion through offerings of common stock and depositary shares and that it had sold approximately $21 billion of its available-for-sale securities, which will result in an after-tax loss of roughly $1.8 billion in the first quarter of 2023. The Company had taken these actions to “strengthen [its] financial position” after “client cash burn . . . remained elevated and increased further in February, resulting in lower deposits than forecasted.”
On this news, the Company’s common share price fell $161.79, or 60.4%, to close at $106.04 per share on March 9, 2023, thereby injuring investors.
On March 9, 2023, media outlets reported that various venture capital funds had advised their portfolio companies to pull their money out of SVB accounts. In a single day, investors and depositors attempted to pull $42 billion from the Bank. The run pushed the Bank into insolvency and the Bank was placed into Federal Deposit Insurance Corporation (“FDIC”) receivership on March 10, 2023.
It quickly emerged that SVB’s collapse was due in part to rapidly rising interest rates. Since 2021, SVB invested substantially in U.S. Treasuries and other government-sponsored debt securities. The Federal Reserve’s interest rate increases “battered the tech startups and venture capital firms Silicon Valley Bank serves, sparking a faster-than-expected decline in deposits that continues to gain steam,” according to media outlets.
Trading of the Company’s stock had been halted before the market opened on March 10, 2023, at which point it had already fallen 34% from the prior day’s closing price during pre-market trading.
On March 14, 2023, The Wall Street Journal published an article reporting that the Justice Department and the Securities and Exchange Commission were investigating, among other things, “stock sales that [the Company’s] officers made days before the bank failed.”
The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) that rising interest rates were negatively impacting the Company’s investments in bonds; (2) that, because the Company’s clients were highly concentrated in the areas of tech startups and venture capital-backed companies, SVB was facing unique liquidity risks in an environment with high interest rates; (3) that, as a result of the foregoing, SVB was reasonably likely to require additional capital; and (4) that, as a result of the foregoing, Defendant’s positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
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