Hedge funds propose to purchase the startup deposits of Silicon Valley Bank at a discount

According to reports, the US financial media Semafor quoted people familiar with the matter as reporting that hedge funds are proposing to purchase the start-up deposits of Silicon Valley Bank (SVB) at a price as low as 60% of the face value. After SVB was taken over by the Federal Deposit Insurance Corporation of the United States, Oaktree, a well-known non-performing debt investment company, began to lend a helping hand to startups. According to the report, this bid range reflects the expectation of how many uninsured deposits will eventually be recovered once the bank’s assets are sold or liquidated. According to the previous report of The Information, the traders of the investment bank Jeffrey are also contacting the founders of the start-up companies whose funds are trapped and proposing to purchase their deposit claims at a discount price.

Interpretation of this information:

The US financial media Semafor has reported that hedge funds are proposing to purchase start-up deposits of Silicon Valley Bank (SVB) at a price as low as 60% of the face value. This move comes after SVB was taken over by the Federal Deposit Insurance Corporation of the United States and Oaktree, a non-performing debt investment company, began to lend a helping hand to startups. The bid range proposed by hedge funds reflects the expectation of how many uninsured deposits will eventually be recovered once the bank’s assets are sold or liquidated. It suggests that hedge funds are anticipating only a partial recovery of uninsured deposits.

This is not an isolated incident, as traders of investment bank Jeffrey are also reportedly contacting start-up companies whose funds are trapped, proposing to purchase their deposit claims at a discount price. This reflects the growing trend of distressed asset purchases by investment funds in the wake of the COVID-19 pandemic, which has hit startups particularly hard.

The proposal by hedge funds to purchase start-up deposits of SVB at a steep discount signals the continuing economic fallout of the pandemic. Startups are particularly vulnerable to economic shocks, and the pandemic has left many of them struggling to stay afloat. The fact that hedge funds are considering purchasing their deposits at such a steep discount indicates a lack of confidence in the recovery of these startups in the near term.

Three keywords that summarize this message are: hedge funds, distressed asset purchases, and economic fallout.