As the US corporates unravel with the crisis posed by the closer of Silicon Valley Bank (SVB), a report revealed that SVB Chief Executive Officer (CEO) Greg Becker sold $3.6 million worth of company stock under a pre-proposed trading plan less than two weeks before the firm disclosed extensive losses that led to its failure.
A report by Bloomberg stated that Becker had filed the plan that allowed him to sell the shares on January 26. The report citing a regulatory filing by the bank said that Greg Becker sold 12,451 shares on February 27. It was the first time in more than a year that Becker had sold shares in parent company SVB Financial Group. The sales were made through a revocable trust controlled by Becker.
On Friday, Silicon Valley Bank was shut down by the Califonia bank regulatory authority. This came in the aftermath of a week of tumult fueled by a letter the firm sent to shareholders that it would try to raise more than $2 billion in capital after taking losses. The announcement resulted in the company shares plunging, even as CEO Becker urged clients to stay calm.
The report added that there’s nothing illegal about the trading plans that Becker used. However, it is “highly problematic” if the CEO was aware of the bank’s plans for the capital raise attempt when he filed the trading plan.
Dan Taylor, a professor at the University of Pennsylvania’s Wharton School who studies corporate trading disclosures told Bloomberg, “While Becker may not have anticipated the bank run on January 26 when he adopted the plan, the capital raise is material…If they were in discussion for a capital raise at the time the plan was adopted, that is highly problematic.”
The report added that in December, the US trade regulator SEC brought new rules that would mandate at least a 90-day cooling-off period for most executive trading plans. Mandating them that they can’t make trades on a new schedule for three months after they take hold. Executives are required to start complying with those rules on April 1, this year.
Silicon Valley Bank (SVB) is a major US lender for venture capital-backed companies, specifically for tech start-ups. The closing of SVB is seen as the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.
According to a separate report by Bloomberg, investors and depositors tried to pull $42 billion from the bank on Thursday. At the close of business on March 9, the SVB had a negative cash balance of $958 million, according to California’s bank regulator, the Department of Financial Protection and Innovation.