Investing lessons from Sillicon Valley Bank collapse

sillicon valley bank
investing
investing lessons
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

Silicon Valley Bank is the talk of the town. What's going on? And what can it teach us about investing?

Shares in Silicon Valley Bank fell by 62% in pre-market trading today. Yesterday, the shares fell another 60% in premarket trading, per CNBC. Nasdaq decided to halt the trading of the stock.

Here's how the Wall Street Journal describes what happened: "The panic surrounding SVB kicked off Wednesday, when the company said it would book a $1.8 billion after-tax loss on sales of investments and seek to raise $2.25 billion by selling a mix of common and preferred stock."

This prompted fear in Silicon Valley about the possibility of a bank run. Prominent VCs including Founders Fund, Coatue Management and Union Square Ventures all told their portfolio companies to stop using SVB, according to Bloomberg.

The key dynamic on display: the contagion of fear in markets. Even though this is easy to diagnose, it's difficult to stop. Some investors, like Bill Ackman, are floating the idea of a government bailout to ease fear in the markets.

For an individual investor, the SVB case also highlights the importance of diversification of investments — across individual equities and market sectors.

Sources

Share this:
You may also like...
Which Stocks to Invest in?
stocks
investing
stock market
Posted on . 2 min read
Do you know why the S&P 500 is the greatest wealth-generating machine?
investing
SP500
warrenbuffet
long term investing
Posted on . 1 min read