SVB Financial Group and two top executives were sued on Monday by shareholders who accused them of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, 'particularly susceptible' to a bank run.
SVB had surprised the market two days earlier by disclosing a $1.8 billion after-tax loss from investment sales and that it planned to raise capital, as it scrambled to meet redemption requests.
Silicon Valley Bank had an estimated $209 billion of assets and $175.4 billion of deposits before its collapse, in the largest U.S. bank failure since the 2008 financial crisis. Its collapse has sparked fears of contagion among other lenders that also cater to wealthy clients, including technology start-ups and venture capital-backed companies, as well as large regional banks.
In Monday's lawsuit, shareholders led by Chandra Vanipenta said Santa Clara, California-based SVB failed to disclose how rising interest rates would undermine its business model, and leave it worse off than banks with different client bases.SVB said on Monday it will explore strategic alternatives for what remains of the company, now shorn of its main banking business.
The case is Vanipenta v SVB Financial Group et al, U.S. District Court, Northern District of California, No. 23-01097.
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