SVB Financial shares dropped as much as 27% in pre-market trading after the startup-focused lender said it intends to offer $1.25 billion of its stock and $500 million of depositary shares in separate underwritten registered public offerings, to shore up its balance sheet after reducing its 2023 forecast as rising interest rates put pressure on the company and its customers.
SVB Financial CEO Greg Becker, in a letter to shareholders, said its customers' “cash burn” increased in February and is driving deposits lower than forecast, which combined with higher costs of capital is pressuring the company’s margins and income.
“When we see a return to balance between venture investment and cash burn – we will be well positioned to accelerate growth and profitability,” Becker added, noting SVB is “well capitalized”.
SVB also published updated outlook estimates, and forecasts a “mid-thirties” percentage drop in net interest income this year - larger than the “high teens” drop it forecast seven weeks earlier, as reported by Reuters.
It now projects the fall in net interest margins this year to ease to 1.45-1.55% from its January forecast for 1.75-1.85%.
SVB signed a subscription agreement with private equity firm General Atlantic to buy $500 million of stock at the public offering price in a separate transaction. The subscription deal is contingent on the closing of the stock offering and will close shortly thereafter.
Contact Sean at sean@proactiveinvestors.com