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Posted by
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So who was on the other side of the SVB equity holders loss trade?
Posted by iPadThai on 3/15/23 at 12:21 pm02
I'm just trying to understand - If SVB's equity holders / shareholders lost all their money, who made money on the other side? I'm not familiar with how balance sheets and assets and liabilities work in a liquidation, so just want to learn from the experts here.
re: So who was on the other side of the SVB equity holders loss trade?Posted by SlowFlowPro on 3/15/23 at 12:26 pm to iPadThai
The assets that made SVB shaky were US Treasuries
The assets that killed SVB were $40B in deposits taken out during the bank run.
I don't know if anyone was "on the other side" of the bank dying. Sometimes companies have stock go to $0.
Maybe the banks that absorbed the $40B in deposits? Is that what you're asking?
The assets that killed SVB were $40B in deposits taken out during the bank run.
I don't know if anyone was "on the other side" of the bank dying. Sometimes companies have stock go to $0.
Maybe the banks that absorbed the $40B in deposits? Is that what you're asking?
re: So who was on the other side of the SVB equity holders loss trade?Posted by LSUFanHouston on 3/15/23 at 12:54 pm to iPadThai
quote:
If SVB's equity holders / shareholders lost all their money, who made money on the other side?
Stock prices are estimates of value. It's not exactly funny money but with the way the market moves today, it's not too far off, either.
Essentially the shareholders paid for a stock an amount that was far in excess of an appropriate representation of the equity in that company.
So I guess whoever "sold" them the stock, before it tanked, made the money on the other side.
quote:
I'm not familiar with how balance sheets and assets and liabilities work in a liquidation, so just want to learn from the experts here.
Bankruptcy trustee sells assets, then there is an order of liquidation. There are classes, and each class is fully paid before the next class gets anything. The last class to get paid, generally there is not enough to make that class whole, so they are usually paid pro-rata.
There are four main classes, and usually subdivisions with each class.
Secured Claims
Unsecured Priority Claims
Unsecured Non-Priority Claims (General Unsecured)
Equity Security Interests
Usually the money runs out before the equity class. This makes sense because generally insolvency means liabilities > assets.
The basic accounting equation is Assets = Liability plus Equity, so if liabilities exceed assets, then equity must be negative, and if assets are sold, there is not enough to pay off all the liabilities, much less the equity.
re: So who was on the other side of the SVB equity holders loss trade?Posted by Godzilla on 3/15/23 at 12:54 pm to SlowFlowPro
Deposits are liabilities. Loans and bond portfolios are the assets.
re: So who was on the other side of the SVB equity holders loss trade?Posted by GhostOfFreedom on 3/15/23 at 1:15 pm to iPadThai
..
This post was edited on 3/15 at 1:16 pm
the short interest was at least 6% at the time but if anyone who was short and had gotten out before the halt would have been up 70 to 80% at their highs short, and of course anyone that sold calls or bought put options would have made a huge profit depending if they closed their positions in time before the halt. With that said I don’t know how they compensate if you are still holding borrowed shares after the halt and takeover. I’m sure they have to make you whole.
Those retail and institutions that were long outnumbered the short float 94 to 1, the big misconception with stock trading is that it is not a zero sum game.
Those retail and institutions that were long outnumbered the short float 94 to 1, the big misconception with stock trading is that it is not a zero sum game.
re: So who was on the other side of the SVB equity holders loss trade?Posted by Jag_Warrior on 3/15/23 at 6:45 pm to Order88
A short seller’s dream is that the shorted company goes bankrupt or the stock goes to zero.
Here’s a more complete explanation:
Here’s a more complete explanation:
quote:
The Bankruptcy Jackpot
A company may reach bankruptcy through a long slide or a quick implosion. If you had warning, you might have closed out your short by repurchasing the shares for a few pennies, returning them to the broker and retrieving your collateral. But if the company goes under before you cover your short, you will probably have to be patient as the courts liquidate the company to pay off the investors. When the court declares the bankruptcy, it cancels any shares still trading and the exchange delists the stock if it hasn't already done so. The stock is no more -- it has ceased to exist.
Repaying the Loan
Your broker will eventually declare a complete loss on the stock loan and cancel your debt. Only then will the broker release your collateral and stop charging you interest on the loan. As a stockholder, your broker may receive some money after the government, creditors and preferred stockholders squeeze as much as possible from the company liquidation. However, most likely your broker will recover little or nothing. By this time, if the stock had ever been part of an index, it’s long since been replaced.
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