Hedge Funds Considering Buying Start-Up Deposits at Discounted Price

03/12/2023 07:08 • NFT Newsflash • 138 views

According to reports, the US financial media Semafor quoted people familiar with the matter as reporting that hedge funds are proposing to purchase the start-up deposits of Silicon Valley Bank (SVB) at a price as low as 60% of the face value. After SVB was taken over by the Federal Deposit Insurance Corporation of the United States, Oaktree, a well-known non-performing debt investment company, began to lend a helping hand to startups. According to the report, this bid range reflects the expectation of how many uninsured deposits will eventually be recovered once the bank’s assets are sold or liquidated. According to the previous report of The Information, the traders of the investment bank Jeffrey are also contacting the founders of the start-up companies whose funds are trapped and proposing to purchase their deposit claims at a discount price.

Hedge funds propose to purchase the startup deposits of Silicon Valley Bank at a discount

Analysis based on this information:

According to recent reports from the US financial media Semafor, hedge funds are said to be proposing the purchase of start-up deposits from Silicon Valley Bank (SVB) at a sharply discounted price of 60% of the face value. This move comes after SVB was taken over by the Federal Deposit Insurance Corporation of the United States due to its failure to comply with regulatory requirements.

Oaktree, a well-known non-performing debt investment company, is said to have stepped in to help startups after SVB’s takeover. The proposed purchase price of just 60% of the deposit face value reflects the expectation of how much of the uninsured deposits will eventually be recovered after the bank’s assets are sold or liquidated.

This sudden interest from hedge funds has been motivated by the desire to acquire start-up deposits at a lower cost and gain profits from the potential future recovery of the deposits. Reports suggest that traders from investment bank Jeffrey are also contacting start-up founders whose funds are trapped, proposing to buy their deposit claims at discounted prices.

This move highlights the challenging times for start-ups and small businesses struggling to maintain liquidity amid the ongoing COVID-19 pandemic. As the economic uncertainty and regulatory requirements continue to impact the financial sector, hedge funds see an opportunity to emulate Oaktree’s example and acquire non-performing debt as an alternative source of revenue.

This story also highlights the vital role of the Federal Deposit Insurance Corporation, as it takes control of failing banks and protects depositors while seeking safe and profitable ways of liquidating assets. The FDIC’s interest in SVB’s assets presents an opportunity for investors to acquire start-up deposits at a discounted price, eventually leading to a win-win situation for both sides.

In conclusion, the proposed purchase of start-up deposits at discounted prices reflects the current business landscape and the willingness of investors to acquire a viable source of income amid the ongoing economic uncertainty. Given the potential for future profits, it is expected that more hedge funds and traders will attempt to follow Oaktree’s example in acquiring non-performing debt.

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Hedge Funds Considering Buying Start-Up Deposits at Discounted Price

Hedge funds propose to purchase the startup deposits of Silicon Valley Bank at a discount

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