Volatility Strikes First Republic Bank’s Shares
Shares of First Republic Bank took a sharp hit in early trading this morning, prompting the company’s trades to be paused due to excessive volatility. This significant drop in stock value implies investor discomfort with the financial institution despite government efforts over the weekend to address the Silicon Valley Bank crisis and potential cascading effects.
The volatility comes just days after a stock market selloff that foreshadowed SVB’s failure, as concerns of contagion remain among analysts and the tech community at large. As of the time of writing, equity shares of First Republic were down by more than 65%, with trading halted due to the extreme price movement.
Attempting to Mitigate Investor Concerns
In an attempt to alleviate investor concerns, over the weekend First Republic announced that it had bolstered its financial position through ‘additional liquidity’ raised from the Federal Reserve and JPMorgan Chase. According to the company’s statement on March 12, it possessed more than $70 billion in unutilized liquidity ‘to fund operations.’ This capital is presumably standing against the company’s selloff and potential loss of investor confidence.
Implications for Startups, VCs, and the Banking Industry
As the SVB dust begins to settle, a pressing question arises: what lies ahead for startups, venture capitalists (VCs), and the banking industry as a whole? Every startup and small business that lost faith in the stability of financial institutions over the past week is now left wondering: Where’s a safe place to park my money?
First Republic Bank, one of those options since the demise of SVB, which claimed in 2022 that it banked half of all U.S. venture-backed startups, has seen its stock plummet. On one hand, the stock drops might be viewed as a concerning signal; on the other hand, other regional banks also appear to be taking a trading hit — including Western Alliance and PacWest — due to uncertainty affecting business decisions for the foreseeable future.
Government Intervention
The move comes despite the FDIC, Department of the Treasury, and Federal Reserve’s announcement Sunday that depositors at Silicon Valley Bank would be made whole. Their actions precluded a potential crisis where thousands of businesses would have been unable to make payroll or operate as usual. However, despite the Federal Reserve announcing a plan to ‘make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors’ through a ‘new Bank Term Funding Program [that will offer] loans of up to one year in length,’ it appears that many public-market investors still want out of smaller banks.
A Potential Future Without Quick Government Intervention
At this juncture, it’s worth considering what the morning markets would look like sans quick work by the government to staunch the bleeding. How are you reacting to SVB’s collapse? What are you telling your fellow employees, portfolio companies, founders, and investors?
For tips and thoughts, you can reach **Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Her e-mail is natasha.m@techcrunch.com. Anonymity requests will be respected.
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