Bill Ackman, who demonised Adani group, seeks bailout for failed US bank SVB

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Bill Ackman, who demonised Adani group, seeks bailout for failed US bank SVB

Following the shutdown of the US-based Silicon Valley Bank (SVB) on Friday (March 10), billionaire investor Bill Ackman sought a bailout package for the commercial bank from the tax-funded US government.

Ackman is the same ‘financial expert’ who upheld the Hindenburg Research report on the Adani group, which wiped out 10 lakh crores worth of investor’s money from the Indian conglomerate in less than two weeks’ time.

While he did not shy away from casting aspersions on the integrity of the Adani group and fomenting turmoil in Indian markets, the billionaire investor took a radically different approach when it came to the US market.

The failure of @SVB_Financial could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash. If private capital can’t provide a solution, a highly dilutive gov’t preferred bailout should be considered.

— Bill Ackman (@BillAckman) March 10, 2023

In a tweet on Friday (March 10), Bill Ackman claimed, “The failure of SVB Financial Group could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash.”

“If private capital can’t provide a solution, a highly dilutive gov’t preferred bailout should be considered,” he demanded despite being well aware that such a bailout package (if provided) will be funded by tax-payers.

The billionaire investor further added, “The govt could also guarantee deposits in exchange for a dilutive warrant issuance and other covenants and protections. If SVB Financial Group is indeed solvent, this would buy time to enable SVB to restore the franchise and raise new private capital.”

The gov’t could also guarantee deposits in exchange for a dilutive warrant issuance and other covenants and protections. If @SVB_Financial is indeed solvent, this would buy time to enable SVB to restore the franchise and raise new private capital.

— Bill Ackman (@BillAckman) March 10, 2023

He tried to make a case for the defunct commercial bank by claiming that the bailout package would serve the interests of depositors and not the ‘poor’ management and equity holders.

Bill Ackman concluded, “The risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why govt intervention should be considered.”

The risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why gov’t intervention should be considered.

— Bill Ackman (@BillAckman) March 10, 2023

Earlier, the billionaire investor did not shy away from defending Sam Bankman-Fried, the founder of ‘ponzi’ cryptocurrency exchange FTX. He even claimed that Sam is ‘innocent until proven guilty’ and that ‘(we should not) sacrifice our core values in a rush to convict.’

Response during the Adani Crash

While Bill Ackman was seen batting for the now-arrested American entrepreneur and the Silicon Valley Bank (SVB) Financial Group, his reaction was starkly different when it came to the Indian conglomerate.

In his response over the fiasco on January 27 this year, the billionaire investor had said, “Adani’s response to Hindenburg Research is the same as Herbalife’s response to our original 350-page presentation.”

“Herbalife remains a pyramid scheme. I found the Hindenburg report highly credible and extremely well-researched. Adani Group’s response speaks volumes. Caveat emptor,” Bill Ackman emphasised.

While he conceded that he did not undertake any ‘independent research’ and his judgment was based on the cursory reading of the Hindenburg Research report and Adani’s response, this gave an opportunity to the likes of Ravish Kumar to cast aspersions on the Indian conglomerate based on Ackman’s tweets.

The billionaire investor, in Adani’s case, did not seek a bailout package despite being aware of the short-term impact that the report of the US-based short-seller would have on the Indian economy and markets at large.

He also did not bother to keep his ‘innocent until proven guilty’ argument forward in Gautam Adani’s case, as he did in Sam Bankman Fried’s case. The sweeping statements of Bill Ackman were used by propagandists to suggest that the Indian conglomerate has been involved in wrongdoings.

The Collapse of Silicon Valley Bank

On Friday (March 10), the Federal Deposit Insurance Corporation (FDIC) announced the shutdown of the US-based Silicon Valley Bank (SVB) and the seizure of its assets.

The development was the result of the sudden shutdown of Silvergate Capital Corp and the unmindful fundraising of SVB, which created panic in the technology industry.

Founded in 1983, Silicon Valley Bank operated out of Santa Clara in California, and provided various services such as online banking, treasury management, and foreign exchange trade.

Reportedly, the crisis came to light on March 8 this year after SVB Financial Group (parent organisation of Silicon Valley Bank) announced a sale of $21 billion of its securities.

This was further worsened by the sale of company shares worth $2.25 billion to shore up its finances, prompted by high deposit outflows at the bank, caused by a downturn in the startup industry. As a result, the Silicon Valley Bank shares fell 60%, leading to a whopping loss of $80 billion.

To salvage the business, SVB CEO Greg Becker held a conference call with clients and venture capital investors, requesting them to “stay calm” to avoid further withdrawals.

However, it was to no avail. Many venture capitalists instead instructed portfolio companies to minimise their exposure to Silicon Valley Bank, withdraw their cash, and look for other lenders (thus further exacerbating the crisis).

In February this year, American business magazine Forbes placed SVB Financial Group in the 20th position in the list of ‘America’s Best Banks.’