Musk considers buying failed Silicon Valley Bank
Elon Musk, the CEO of Twitter, plans to purchase the defunct Silicon Valley Bank and transform it into a digital bank! Musk said he is open to the idea in a tweet on Saturday in response to Razer CEO Min-Liang Tan‘s suggestion that Twitter acquires SVB. Almost half of all venture-backed businesses in the US use this bank, which was shut down by regulators last Friday after customers hurried to withdraw their money out of fear for the bank’s stability. The bank’s approximately $175 billion in deposits have been taken over by the FDIC. This was the biggest US bank failure since 2008. The SVB assets will be sold by the FDIC, with insured depositors receiving their insured deposits and uninsured depositors receiving dividends from the sale of the assets.
The SVB Financial Group failed as a result of depositors’ frantic withdrawals in response to the bank’s situation. The Federal Deposit Insurance Corporation (FDIC) acquired the 16th-largest bank in the US, with deposits totaling more than $175 billion, and created the Deposit Insurance National Bank of Santa Clara as a result (DINB). The FDIC transferred all of Silicon Valley Bank’s insured deposits to the DINB.
SVB, which had 17 locations in Massachusetts and California, was the 16th-largest bank in the US. As the DINB continues to operate normally, the FDIC will sell the SVB’s assets. The uninsured depositors in the bank will get dividends from the asset sale, while the insured depositors of SVB will receive their insured deposits. According to Garry Tan, CEO of Y Combinator, if his firms cannot access their money, approximately one-third of them will not be able to pay their employees at some point in the upcoming month. Leading venture capitalists promised to “actively back” the lender.
VC firms have expressed their support for SVB, which has been an important platform for 40 years. However, Indian investors and SaaS startups are rattled by the developments, and some have started moving their deposits out. US billionaire investor Bill Ackman has suggested that the US government should consider a “highly dilutive” bailout for the lender. He said that the failure of SVB could destroy an important long-term driver of the economy.