Here’s Why Black Bear Value Partners Shorted SVB Financial Group (SIVBQ)

Black Bear Value Partners, an investment management firm, published its first quarter 2023 investor letter, a copy of which can be downloaded here. Black Bear Value Fund returned +0.8% in March and +2.9% YTD, at the same time the S&P 500 returned +3.7% and +7.5% and the HFRI Index returned +1.2% and +4.5% in March and YTD, respectively. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Black Bear Value Partners highlighted stocks like SVB Financial Group (OTC:SIVBQ) in the first quarter 2023 investor letter. Headquartered in Santa Clara, California, SVB Financial Group (OTC:SIVBQ) is a diversified financial services company. On July 3, 2023, SVB Financial Group (OTC:SIVBQ) stock closed at $0.4900 per share. One-month return of SVB Financial Group (OTC:SIVBQ) was 35.73%, and its shares lost 99.88% of their value over the last 52 weeks. SVB Financial Group (OTC:SIVBQ) has a market capitalization of $29.008 million.

Black Bear Value Partners made the following comment about SVB Financial Group (OTC:SIVBQ) in its first quarter 2023 investor letter:

“We have been short SVB Financial Group (OTC:SIVBQ) since 2022. I do not typically name our shorts unless we have fully exited and do not plan on re-shorting but given the bank’s demise it seems safe to discuss.

A bank run and the rapid disintegration of the business was considered a super low (sub 5%) outcome that was not central to our thesis. SIVB was symptomatic of a general theme in our short book…low rates created perverse behavior whose outcomes were hard to predict. While the mark-to-market on their securities book looked ominous, my timelier worry was the low[1]cost nature of their deposits and whether the money was sticky (i.e., wouldn’t move to another bank). When rates are low nobody cares what they earn on their money. A large portion of their capital was effectively free. As rates moved up it seemed likely that they would have to raise their funding costs to keep customers. The path I thought this would take was lower earnings for many years due to higher interest costs….and likely a dilutive equity raise to fix the hole from their securities…” (Click here to read the full text)

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SVB Financial Group (OTC:SIVBQ) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held SVB Financial Group (OTC:SIVBQ) at the end of first quarter 2023 which was 45 in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.