Stocks of high-growth technology companies with deposits at Silicon Valley Bank sold off after
was shut down by regulators last week, and many of their share prices haven’t fully recovered.
There is good news, but it is complicated. While the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corp. said SVB depositors would be made whole, analysts and investors alike are trying to sort through which companies face continued risk.
The fear is that some may end up without sufficient liquidity if the situation worsens.
“The moves by the government will not solve this crisis, but they will help,” wrote Brian Mulberry, client portfolio manager at Zacks Investment Management.
(ticker: ROKU) stock dropped as much as 13% from Thursday morning, when it was about $65, to its low point Friday. It still hasn’t made a full recovery, trading at around $59 on Monday.
The initial concern was about the company’s cash. Roku said in a filing with the Securities and Exchange Commission that it had $1.9 billion in total cash and equivalents, of which $487 million, or 26% of the total, is held at SVB.
Analysts expect a $302 million Ebitda, or earnings before interest, taxes, depreciation, and amortization, loss for this year. The roughly $1.4 billion of cash Roku has outside of SVB is more than enough, especially if profits can roll in after this year.
“They have a solid balance sheet,” said D.A. Davidson analyst Tom Forte, who is “confident that the company has the ability and cash on hand to be able to move forward on its strategy.”
So, why is Roku stock still in its doldrums? The market is still monitoring the situation and there is still a chance something goes wrong.
Evercore analyst Shweta Khajuria points out the selling would be much worse if the market thought Roku was going to lose all its cash. If it were likely to lose the 26% of its cash held at SVB, the enterprise value, which reflects the firm’s cash, would drop by at least that much—but probably more. Investors would worry about the firm’s ability to remain in business.
(PTON) stock, too, fell as much as 13% from Thursday morning when it traded at just over $13, to its low point of just over $11. It was at just over $11.30 on Monday.
Cash is the issue here, as the company has less than $500,000 with SVB, according to Evercore analysts, out of its total $870 million as of the end of 2022. The cash is recoverable, and Khajuria notes the stock remains pressured because of selling in the retail trading community, which tends to keep an eye on the heavily-covered Peloton in the media.
(ETSY) stock fell as much as 7%, from just over $109 to just over $102. It was over $103 on Monday.
The company said in an email to Evercore that it has $30 million of cash with SVB, a tiny portion of its more than $1.1 billion in cash and short-term investments.
The other concern is near-term sales. Any transaction users make on the e-commerce platform that SVB serves as the intermediary for can’t be completed. But the company told Evercore that it doesn’t expect any impact in the March quarter, indicating that the company doesn’t rely on SVB for a meaningful portion of transactions.
Trade Desk (TTD) stock has dropped as much as 12%, from $59.11 to just over $51, and was around $54 on Monday. It has less than 1% of its more than $1 billion in cash with SVB. It does, according to Evervcore, have a $450 million untapped line of credit. The good news: “SVB was a small part of it—no direct exposure,” wrote Khajuria.
(BILL) stock dropped as much as 16%, from $80 to $67, and was up to around $73 on Monday.
Total cash is about $2.6 billion, the company said Saturday, and about $300 million is at SVB.
Also, the company uses SVB to process payments it receives from small business customers, so the concern is if those transitions aren’t completed. But the company is now switching away from SVB to use other banks instead, according to Mizuho analysts.
These stocks could be buys—unless the situation takes an ugly turn.
Write to Jacob Sonenshine at email@example.com
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