Online gaming platform Roblox had about 5% of its $3 billion in cash and securities balance deposited at Silicon Valley Bank (SVB) when it was seized by the federal government last Friday.
What happened? On Wednesday of last week, SVB said it was looking to raise more than $2 billion after suffering major losses on a batch of government bonds it had been forced to sell, due to rising interest rates. Investors got spooked and SVB’s stock lost 60% of its value by Thursday, inspiring a run on the bank with companies looking to transfer their deposits to other institutions. On Friday, the federal government seized SVB, marking the second-largest bank collapse in U.S. history.
Why is this important? SVB was the 16th-largest bank in the United States and had become a go-to option for a wide range of tech companies and startups. According to SVB reports, its clients included 44% of last year’s venture-backed tech and healthcare IPOs and 55% in 2021.
What about Roblox? In a Securities and Exchange Commission (SEC) filing submitted last Friday, Roblox indicated that approximately 5% of its cash and securities balance, around $150 million, was being held by SVB when the bank collapsed.
Were other media companies involved? In another SEC filing, streaming platform Roku said that the bank held more than 26% of its cash and cash equivalents, or about $487 million. Vimeo’s filing reported that while the company was involved with SVB, its total deposits were less than $250,000, the amount which would be fully insured by the FDIC.
Are Roblox or Roku in trouble? Not anymore they aren’t, and neither are any of the other organizations which had deposited with the bank. On Sunday, the Federal Reserve and FDIC invoked a systemic risk exception to cover the roughly $175 billion in customer deposits at SVB. The FDIC is not bailing out SVB shareholders or bondholders, who are being left empty-handed.
What happens now? The U.S. government spent the weekend looking for a large financial institution willing to purchase SVB, but as of this morning, no buyer had been found. The future of the bank is uncertain and will depend on whether or not the government can find someone to buy it. It’s also unclear if any other institution will be willing or capable of filling the gap that SVB’s collapse is sure to leave in the tech and start-up sectors.
Pictured at top: Roblox press photo.