Silicon Valley Bank exploring sale after capital raise fails, Twitterati says 'Lehman moment is here'

SVB Financial Group is exploring options, including a sale, after its efforts to raise capital through a stock sale failed, reported Reuters on Friday as the crisis at the start-up focused lender rippled through global markets and hit banking stocks.

Shares of Silicon Valley Bank were halted on Friday after tumbling as much as 66% earlier in premarket trading.

With the lender's stock crashing, it led to a contagion for other US and European banks, and Twitter users said this is a "Lehman moment" referring to the investment bank Lehman Brothers whose collapse in 2008 was one of the biggest triggers for global financial crisis. 

"Most people don't realize how crucial Silicon Valley Bank is. Billions of dollars in venture debt. Untold amounts of warrants and convertible notes in early-stage firms. If SVB fails, this could be the Lehman moment for the startup world," said a Twitter user. 

"Regulators and media spent all this time focusing on stablecoins and small crypto markets. Meanwhile one of the largest banks that hold assets for Silicon Valley businesses is toast. If SVB fails, it would be the largest bank failure since the Lehman collapse," said another Twitter user.

"SVB crisis will have major repercussions. Probably similar to Lehman for the tech industry. Many startups will be wiped off. My heart is with my fellow founders who are exposed," tweeted Cenk Sidar, co-founder and CEO of Enquire AI, a next generation insights platform.

The S&P 500 banks index dropped 4.2% on Friday after a 6.6% decline on Thursday, while the KBW Regional Banking index was down 5.3%. Europe's STOXX banking index fell almost 5%, set for its biggest one-day slide since March 2022, with declines for most major lenders, including HSBC, down 6.1%, and Deutsche Bank, down 9.2%.

The problems at SVB underscore how a campaign by the US Federal Reserve and other central banks to fight inflation by ending the era of cheap money is exposing vulnerabilities in the market. The technology sector has been hit hard in the past few months and stress has appeared in other corners of the market as rates rise.

SVB stunned investors Wednesday when it said it would issue $2.25 billion of shares and booked a $1.8 billion loss on the sale of a large part of its available-for-sale securities. 

The Santa Clara, California-based company took steps this week to shore up capital after being hit by losses on its securities portfolio and a slowdown in funding at the venture capital-backed firms it serves.

With inputs from Reuters