Silicon Valley Bank (SIVB) was shut down Friday.
According to Barron’s, the Nasdaq will delist the stock: “Nasdaq said it will delist SVB’s stock, per its listing rules. Even if the company appeals, shares would trade over the counter, not on the exchange.”1
The WSJ reports: “The Federal Deposit Insurance Corp. said it has taken control of SVB via a new bank it created call the Deposit Insurance National Bank of Santa Clara. All of the bank’s deposits have been transferred to the new bank, the regulator said.”2
Deposit Insurance National Bank just doesn’t sound as flashy as Silicon Valley Bank.
This seems to be another result of the latest tech bubble going POOF. A bank that appealed to capitalistic startups is now nationalized.
But that’s not the point of this post.
This is another reminder of that easily forgotten maxim: no one knows anything. I beat this drum a lot because it needs to be beaten.
Peter Bernstein has been attributed with saying, “Forecasts create the mirage that the future is knowable.”
It’s not knowable. And the story of SIVB confirms this.
Here is what happened in the days and months before SVB shut down on March 10.
One day earlier, the reputable Morningstar via Morningstar Quantitative research had a fair value of $212.28 on the stock and showed that it was undervalued at a 50% discount.
To be fair, they made it clear that uncertainty was “extreme”.3 And they only gave it three stars instead of their famous five.
Wells Fargo’s equity research two days before the bank collapsed and got an adorable new government name said this: “While the funding model is under pressure due to private market valuation disruption, we believe that SIVB should continue to see a premium valuation due to strength of the franchise and rate shares to Overweight.”4
They did drop their price target from $350 to $300, though.
CNBC’s Mad Money Man himself, Jim Cramer, said in a segment a month ago regarding SIVB’s problems, that “the fears were not justified” and “the stock’s still cheap”.5 He said this at $320 a share.
Oh, dear Jimmy.
Enough name-dropping. At the time of this writing, all 19 of the recommendations on Yahoo Finance’s Recommendation Trends for the stock in March had it as “Strong Buy”, “Buy”, and “Hold”. No “Underperform” and “Sell” in sight.6 Therefore this is not one person or firm’s problem.
Listen up. It’s easy to pick on other people’s failed opinions. It’s much harder for you to highlight yours and for me to highlight mine.
It’s a good reminder that all of us can use a dose of humility.
We should also remember that when banks fail, real people get hurt. Any joking above is not about financial harm, but about the folly of financial forecasting.
Consider too that this is a developing story! More news will occur by the time this lands in your inbox or you read it in Blog Land.
For now: be careful when you make investment decisions based on “research” and opinions...
Even when they are your own.
- Morningstar’s “Quantitative Equity Research Report” on SIVB. Released March 9, 2023. Page 1 of 4.
- Wells Fargo Securities. Equity Research on SIVB, March 8, 2023. Page 3 of 6.
- CNBC Television. “Jim Cramer says he's 'intrigued' by these 10 top performing stocks”. Accessed online: https://youtu.be/gdg2AD0pouY
- Yahoo! Finance. Accessed online: https://finance.yahoo.com/quote/SIVB (Friday, March 10 at 11:20am PST).