HSBC to pump £2bn into Silicon Valley Bank’s UK unit
Massive relief for tech companies as HSBC announcers will pump £2bn into Silicon Valley Bank’s UK unit
HSBC has told tech investors it will pump £2bn of liquidity into Silicon Valley Bank’s UK unit, in a show of reassurance after acquiring the division for just £1.
Bosses at the banking giant tried to further calm the minds of the start-ups during a conversation yesterday after the company ran into trouble after late-night crunch talks.
HSBC CEO Noel Quinn and his British boss Ian Stuart promised to ensure that operations run smoothly at the British arm of the collapsed US bank.
Salvation: HSBC chief Noel Quinn (pictured) and UK boss Ian Stuart pledged to ensure operations run smoothly at SVB’s UK arm
During the call, venture capital firms were told the purchase made strategic sense for HSBC, while Quinn told the BBC yesterday it was “too good an opportunity to miss.”
And startup founders described feeling immensely reassured and immensely relieved after a stressful weekend watching SVB crumble across the Atlantic.
The bank’s customers can now access their accounts and withdraw funds following emergency consultations between the government and the Bank of England.
The acquisition cost no taxpayer money and will be financed from existing funds, HSBC’s UK-based foreclosed subsidiary said in a statement yesterday.
HSBC is confident that the rescue agreement will strengthen its presence in the technology and life sciences industries.
At the same time, founders and bosses of start-ups in science, education and aerospace said they were back to business as usual, ending a hectic four days.
Those with money strapped in SVB UK had to scramble on Thursday and Friday to withdraw as much cash as possible to stay afloat.
Some were able to raise enough money to keep them in business for months, while others couldn’t and would have collapsed “almost immediately.”
Sebastian Weidt, CEO of Universal Quantum, which builds the next generation of computers, said the past 72 hours have been “quite a rollercoaster.”
He said: ‘The UK was really at risk of losing the technology sector, the future of the economy. If this deal hadn’t happened, it would have been a disaster.’
Benedikt von Thungen, founder of diagnostics company Sanome, which works with the NHS, said he breathed a “huge sigh of relief” when the sale was announced.
On Thursday, he took three months’ worth of cash from the bank to keep Sanome afloat before unsuccessfully trying to withdraw the rest of his money on Friday when the SVB collapsed.
The 37-year-old said the intervention prevented companies from going bankrupt immediately.
Russ Shaw, founder of Tech London Advocates, said the purchase of HSBC prevented the UK tech ecosystem from being ‘decimated’.
However, it is still not clear whether SVB UK would be managed as a standalone division or kept under the same brand.
HSBC said the arm had loans of around £5.5bn and deposits of around £6bn to £7bn as of March 10.
Danni Hewson, AJ Bell’s head of financial analysis, said “time will really tell the story” amid the volatile environment.