Tech groups move to reassure investors as HSBC swoops on SVB UK

Large swathes of London-listed tech companies rushed to reassure investors Monday morning after it was confirmed that HSBC would buy Silicon Valley Bank’s collapsed UK arm.

The £1 deal facilitated by the Government and the Bank of England means all customer deposits are protected, while the lender’s customers can access their money and banking services as normal from today.

HSBC Group boss Noel Quinn told investors the deal “makes excellent strategic sense for our UK business,” adding that SBV UK clients “can be safe in the knowledge that their deposits are backed by the strength, safety and security of the banking giant. .

The parent company’s collapse was triggered after the tech investor posted a $1.8bn (£1.5bn) loss on a $21bn bond portfolio, scaring off investors and clients and sparking a run in the bank arose.

Head of Investment at Interactive Investor Victoria Scholar said: “The tech sector lender took a stance on interest rates last year and miscalculated the expected level of rate hikes from the Fed, causing the lender to incur heavy losses.

“In addition, rising borrowing costs and volatile financial markets, which caused a shortage of IPOs, made life more difficult for many of SVB’s tech start-ups, who began to withdraw deposits, putting pressure on SVB.”

The British government made efforts to limit the impact of the crisis at SVB, which threatens to destabilize large parts of the British technology sector.

HSBC said SVB UK had loans of around £5.5bn and deposits of around £6.7bn, and tangible equity is expected to be around £1.4bn

The bank added: ‘Final calculation of the gains resulting from the acquisition will be provided in due course. The assets and liabilities of SVB UK’s parent companies are excluded from the transaction.’

SBV UK made a pre-tax profit of £88 million in the year to 31 December.

Concerns about the impact of SBV’s collapse on the UK tech sector sparked a flurry of updates on the London Stock Exchange on Monday, as groups mobilized to reassure investors.

Polarean Imaging has been forced to request that trading of common stocks on AIM be temporarily suspended “while it seeks more clarification” about its exposure to SVB’s demise.

The medical technology company said it had a total cash balance of $13.9 million as of February 28, 2023, of which $12.4 million is held through SVB and $9.8 million of that is held in money market accounts of other financial institutions. It has $1.5 million in cash at Wells Fargo.

In addition, the company has $1 million in an SVB checking account and $1.6 million in an SVB checking account. The United States Federal Deposit Insurance Corporation guarantees $250,000 in U.S. deposits.”

Naked Wines said it does not expect to be hit with a loss from the bankruptcy of SVB, which it banked with, adding it had “robust liquidity” of £32m in gross cash.

Group chief executive Nick Devlin said: ‘We are announcing today that day-to-day operations will not be affected and we do not expect to incur any loss as a result.

“Although this situation remains volatile, we maintain a robust balance sheet with approximately £185m in equity and £17m in cash on hand.”

AIM-listed RWS Group said it “believes” it has “limited exposure to SVB,” reiterating the outlook in its recent AGM statement, continuing to expect full-year adjusted earnings before taxes will be in line with market expectations.

It added: ‘The group remains well placed to continue to deliver on its strategy with the added benefit of a strong balance sheet, with a net cash position of £71.9m at 30 September 2022.’

Chief executive of pharmaceutical industry technology provider Diaceutics Peter Keeling said: “We are working quickly to ensure the company’s financial resilience in the face of these unprecedented events.

“We continue to trade strongly, expanding our relationships with clients, while expanding our significant new business pipeline of opportunities and a strong accounts receivable and order book. We hope to lift the suspension of our shares once our funding position is secured.”

Meanwhile, THG, Cornerstone FS, Auction Technology Group and Science Group were among the companies that said they had no material exposure to the bank.

Head of money and markets at Hargreaves Lansdown Susannah Streeter said HSBC’s takeover of SBV UK should “end the nightmare thousands of tech companies have been going through in recent days”.

She added: “This will be greatly welcomed by the government given the looming crisis that threatens to overshadow Budget Day, as a bailout for the major tech sector would not have been a good idea if millions have been told there is little extra money to alleviate costs. life crisis.

SVB was considered the lifeblood of the technology industry, providing facilities to start-ups that had difficulty accessing elsewhere in the market, so while the immediate liquidity nightmare appears to have been lifted, concerns will still remain about future banking options .’