US customers of Silicon Valley Bank which are not covered by a government-backed insurance scheme have been rushing to sell their deposits to pay salaries and other operating expenses after the lender was shuttered by regulators.SVB will reopen on Monday for insured depositors under the newly formed Deposit Insurance National Bank of Santa Clara, but it is not yet clear whether or when customers with more than $250,000 in their accounts will be able to access all of their money.
Some are trying to sell at steep discounts to raise cash. On Friday, uninsured SVB deposits were being quoted at a price of between 55 and 65 cents on dollar, according to Cherokee Acquisition, a claims trading platform in bankruptcy cases. Other deposits were being offered for between 70 and 75 cents on the dollar, according to a person familiar with the situation.
Start-up founders have resorted to selling uninsured deposits as they need to pay staff as early as next week. “I’ve had a few companies sell [for] 90 cents on the dollar to make sure they make payroll. All of these companies have the SVB effect,” said one venture capital investor.