Billionaire Investor Bill Ackman Warns More Banks Will Collapse Despite Fed Intervention

(TheStreet) SVB’s failure, which was the second-largest of a bank in U.S. history, on March 10, has shaken many investors. It was the result of a bank run, caused by the bank’s announcement that it planned to raise $2.25 billion by issuing new common and convertible preferred shares to shore up its finances, after it sold bonds in its portfolio of investments at a $1.8 billion loss.

About $42 billion of deposits were withdrawn by the end of March 9, according to a regulatory filing. By the close of business that day, SVB had a negative cash balance of $958 million, according to the filing.

The Federal Deposit Insurance Corporation took control and is now the manager of $175 billion in customer deposits, including money from several startups and from some of the biggest names in the technology world.

The regulator also created a new entity, and indicated that unsecured depositors, that is, SVB customers with more than $250,000 in their accounts, will not, for the moment, have access to their money. 

This leaves many uncertainties about the ability of many startups to operate in the coming weeks, since their funds are locked up. The FDIC said it will pay uninsured depositors an "advance dividend within the next week."

'There Will Be Bank Runs Beginning Monday'

The question is how much this "advanced dividend" will amount to. 

In its website, the federal agency describes an advance dividend as a payment that "gives depositors access to a portion of their uninsured funds," but it doesn't say how this "portion" will be determined. 

Depositors do not have to file a claim for their advanced dividend, the FDIC said.

Financier Bill Ackman, founder of hedge fund Pershing Square Capital Management, said in a Twitter post that when the new entity replacing SVB begins operating on March 13, the FDIC will announce that they will immediately pay about 50% of their funds to depositors.

Uncertainty will remain on the other half of their funds.The billionaire's reasoning is that a lack of clarity for startups, which are known to burn cash, not knowing when they will be able to access all of their funds, plunges them into uncertainty that will impact their operations in terms of priorities.


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