Shares of First Republic Bank fell sharply in early trading this morning, which caused trades of the company to be paused due to volatility. That implies investor discomfort with the financial institution despite government activity over the weekend to sort the Silicon Valley Bank crisis and potential cascading effects. The volatility comes just days after a stock market selloff that previewed SVB’s failure, as concern of contagion remains among analysts and the tech community more broadly.
As of the time of writing, equity shares of First Republic were off more than 65% and trading was halted as mentioned.
In an attempt to get ahead of investor concern, over the weekend First Republic announced that it had raised its financial position through “additional liquidity” raised from the Federal Reserve and JPMorgan Chase. Per the company’s statement on March 12, it had “more than $70 billion” in unutilized liquidity “to fund operations.” Presumably that’s the capital standing against the company’s selloff and a potential loss of investor confidence.
The question ahead of every startup and small business that lost faith in the stability of financial institutions over the past week is straightforward: Where’s a safe place to park my money? First Republic Bank is one of those options since the death of SVB, which claimed in 2022 that it banked half of all U.S. venture-backed startups. On one end, the stock drops might be seen as a concerning signal; on the other end, other regional banks also appear to be taking a trading hit — including Western Alliance and PacWest — as uncertainty links business actions for the foreseeable future.
The move comes despite the FDIC, the Department of the Treasury and the Federal Reserve’s announcement Sunday that depositors at Silicon Valley Bank would be made whole. Their actions precluded a potential crisis of thousands of businesses being unable to make payroll or operate as usual. However, despite the Federal Reserve also announcing that a plan to “make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors” through a “new Bank Term Funding Program [that will offer] loans of up to one year in length,” it appears that many public-market investors still want out of smaller banks.
At this juncture it’s worth considering what the morning markets would look like sans quick work by the government to staunch the bleeding.
How are you reacting to SVB’s collapse? What are you telling your fellow employees, portfolio companies, founders and investors? For tips and thoughts, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912.