ASX-listed companies have revealed tens of millions of dollars in exposure to the Silicon Valley Bank collapse, as Australian tech leaders face an anxious wait for US authorities to bail out depositors of the failed institution.
Silicon Valley Bank (SVB) collapsed on Friday after it reported a US$1.8 billion loss on its sale of US Treasury securities, which spooked depositors and raised concerns over the institution’s liquidity.
A bank run followed, as depositors, including major players in the tech and startup scene, rushed to remove their holdings.
US regulators quickly stepped in, fearing an irreversible run would totally deplete the bank’s assets, annihilate the holdings of SVB depositors, and grind business clients to a halt.
The Federal Deposit Insurance Corporation (FDIC) was appointed the bank’s receiver, with its new operators freezing SVB accounts and transferring their balances to the newly-created Deposit Insurance National Bank of Santa Clara (DINB).
Although the bank run was stopped dead, panic spread: the FDIC only guarantees deposits valued at US$250,000 and under, giving no guarantee that companies with significant cash reserves at SVB would ever see their money again.
However, in an extraordinary move, US regulators on Monday confirmed they will backstop all depositors of SVB, not just those with smaller balances covered by standard FDIC protections.
The confirmation that all depositors will be made whole came as a relief for the startup ecosystem, regardless of its parallels to the bank bailouts of 2008.
Industry leaders currently expect limited local exposure to the SVB collapse.
AirTree Ventures, one of the nation’s leading venture capital firms, said approximately 28% of its portfolio companies hold an SVB account.
“For the majority, their exposure is minimal,” the firm announced Monday.
Even so, some major Australian tech firms, and others businesses listed on the ASX, are now informing investors exactly how much of their cash is currently locked up in DINB.
Australian-founded PDF and e-signature company Nitro is among those with the greatest exposure, confirming the equivalent of AU$18.36 million of its global cash reserves are held as SVB deposits.
“Nitro is engaging regularly with its customers and partners to minimise the impact of any disruptions caused by the SVB developments and, as a contingency measure, is in the proces of evaluation short-term funding solutions to address any operational requirements,” the company said.
Cloud-based accounting provider Xero said it has “no material exposure” to SVB, with approximately AU$7.3 million, or less than 1% of its cash on hand at the end of September 2022, locked up in the bank.
Sydney biopharmaceutical firm Tissue Repair Limited told investors around AU$3.26 million of its funds are held with SVB, with the setback to have “no immediate effect” on its operations.
Perth high-performance computing firm Dug says it has AU$2.4 million in SVB accounts and a further $AU1.4 million in transit from an SVB subsidiary.
The company said the situation will not impact its liquidity or ability to operate as normal.
Freelancing and crowdsourcing marketplace Freelancer has tallied AU$3.54 million in SVB holdings and foresees no immediate effect on its day-to-day operations.
Dubber has reported holdings of approximately AU$1.3 million, and also reported no immediate setbacks to its operating capabilities.
Elsewhere, online experiences marketplace Redbubble has confirmed AU$1.7 million is locked away at the bank, and buy now, pay later operator Sezzle has claimed AU$1.8 million in exposure.
The list of companies outlining their exposure is expected to grow in the days ahead.
As local tech titans scramble to assess their exposure to the collapse, the Technology Council of Australia says it stands ready to assist hard-hit firms.
“The Tech Council of Australia is closely monitoring the evolving situation in the United States and is working with member companies, including local VC firms, following Silicon Valley Bank being placed into receivership as some Australian companies held deposits or had loan facilities with them,” CEO Kate Pounder said Monday.
“We welcome the announcement this morning Australian time that US financial regulators will ensure that all depositors of Silicon Valley Bank will be paid back in full and be able to access deposits from Monday, 13 March, US time.
“This will relieve financial pressure on affected companies.
“We have also been working closely with the Australian Government to understand the potential impact on Australian companies and their workforces.”
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
