The legendary investor and entrepreneur says he has an publicity between $8 million and $10 million to the California financial institution, which was closed on March 10 by regulators, after a run on the financial institution.
The failure of Silicon Valley Bank, the go-to lender of startups, is a monetary and banking earthquake that has not but revealed its full extent.
Some 24 hours later, buyers, companies and startups are attempting to evaluate the repercussions that the closure of the financial institution by the regulators may have for them. At this time, they’re nonetheless assessing the affect.
This is the case with billionaire Mark Cuban, who has simply indicated that his publicity to SVB is within the hundreds of thousands of {dollars}.
“I’m only exposed to maybe $8 to $10 million,” the Shark Tank star mentioned throughout a Twitter Spaces on Mar.11. “CostsPlus Drugs.com deals with SVB. So we had, I think, $3.1 million there.”
CostPlus Drugs.com is a web-based pharmacy that the billionaire co-founded in January 2022 to disrupt massive pharma. The platform is the one firm that he has based or invested in that bears his title. The firm’s official title is Mark Cuban CostPlus Drug Co.
‘I’m Writing Checks on Monday Morning’
“We’re scrambling and opening up accounts and staying up late talking to bankers to get accounts opened up at other banks. And you know, I’m writing checks on Monday morning [Mar. 13] first thing, to make sure that payroll is payable and, you know, because this CostPlus Drugs.com is my baby,” Cuban continued.
“Right now I’m not letting it go anywhere. I’m playing offense in every way that I know.”
The regulators shut down Silicon Valley Bank (SVB) on Mar. 10, after a run on the financial institution. The Federal Deposit Insurance Corporation (FDIC) took management and is now the supervisor of $175 billion in buyer deposits, together with cash from a number of startups and from a number of the greatest names within the expertise world.
The regulator additionally created a brand new entity, and indicated that unsecured depositors, that’s to say SVB prospects with greater than $250,000 of their accounts, is not going to, for the second, have entry to their cash.
This leaves many uncertainties in regards to the capacity of many startups to function within the coming weeks, since their funds are locked up. The FDIC mentioned it is going to pay uninsured depositors an “advance dividend within the next week.”
The query is how a lot this “advanced dividend” will quantity to. The extent of the disaster attributable to SVB will depend on the response that the FDIC will carry to this query mentioned Cuban. There can be a contagion impact if the superior dividend just isn’t vital, he warns.
“If nobody gets anything, and payrolls aren’t made, vendors aren’t paid. And those vendors when they don’t get paid, they can’t pay their payroll. So there’s a second, third and fourth order that happens, you know, every two weeks effectively for payrolls, and so if there’s no money paid out in ‘advanced dividends,’ we have a problem,” the billionaire argued.
But “if there’s a material amount that covers enough, that allows enough for the startups, enough of the wine industry, enough of the company’s impact to pay their bills, and make their payroll, then six months from now we won’t remember the details.”
Contagion
The closure of SVB poses a giant drawback for the startup ecosystem, many specialists have already warned. The agency was a central participant within the innovation economic system. It was the spine of the tech trade in Silicon Valley. It performed an vital position by offering specialised monetary companies, trade experience, a useful community, and a powerful fame.
It additionally provided a spread of economic companies, tailor-made particularly to the wants of startups, similar to enterprise debt, company banking and asset administration. These companies are designed to assist startups handle their funds, optimize their money stream and scale their companies.
Its closure mixed with the chance that many startups might not be capable to entry their deposits is more likely to trigger critical money stream issues for younger corporations identified to burn by cash.
Such an occasion might push many startups to file for chapter because of lack of liquidity, however it’s also a possibility for buyers like Cuban to scoop up promising corporations. When requested about this risk, the billionaire didn’t hesitate to say that he would go on the offensive if this have been the case.
“I’m not gonna lie and say it didn’t cross my mind to say ‘okay, who’s going to be desperate? and where can I pick up some scraps and invest in good companies?’ Just like in 2000 buying Amazon and Dell and other companies when all the companies are getting hit, or buying Live Nation in March of 2020 when who knew how long the pandemic was going to run. But that only is going to be available to a select few because they’re private companies, and not everybody is able to take advantage of that” the legendary investor mentioned.
He then defined that the state of affairs might be clearer on Mar. 13, when FDIC will present extra particulars on the cost of the “advanced dividend.”
“It really is going to depend on how much the advance dividend is. If it’s 50%, and you get that by Wednesday, okay, because Wednesday is the 15th. And maybe payroll is a little late, but that covers payroll for at least some percentage,” Cuban mentioned.
“And then the next question is how well do they communicate what’s happening for the other 50%. If it’s all uncertainty and we don’t know any type of timeline and there’s no ongoing communication, that’ll create a smaller contagion, but still a contagion.”
Besides Cuban, corporations like Roku, Roblox, and Rocket Lab have already introduced their publicity to SVB. Crypto agency Circle, which is the issuer of cryptocurrency USDC, had $3.3 billion in deposits within the failed financial institution.
Source: www.thestreet.com
