SVB Financial Group plunges on $1.75B share sale

© Reuters.

By Sam Boughedda

SVB Financial Group (NASDAQ:SIVB) shares dropped 30% premarket Thursday after it embarked on a $1.75 billion share sale in order to shore up its finances.

In addition, the struggling firm has entered into a subscription agreement with equity investor General Atlantic to purchase $500M in a separate private transaction.

SVB intends to grant the underwriters in the common stock offering an option to purchase up to a further $187.5M of common stock and the underwriters in the preferred stock offering an over-allotment option to purchase up to an additional $75M, or 1.5M depositary shares.

The company said it would use the net proceeds for general corporate purposes.

Within Wednesday evening's press release, SVB said it had completed the sale of its available securities portfolio. SVB sold approximately $21B of securities, resulting in an after-tax loss of about $1.8B in the first quarter of 2023.

Reacting to the news, Wedbush analysts cut the firm's price target on SVB to $200 from $250 per share, maintaining a Neutral rating. They told investors in a note that Wedbush finds the move interesting as "many peer banks have been lowering asset sensitivity in the current environment," but SVB is taking the opposite approach.

"While we view these actions combined with a weaker guide as a clear negative, we do not believe that SIVB is in a liquidity crisis, especially following the significant proceeds received from the AFS sales, capital raise, and low loan-to-deposit ratio in the mid-40s," the analysts wrote.