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SVB Financial foresees little fallout from recent IPO messes

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity

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SVB Financial foresees little fallout from recent IPO messes

SVB Financial Group executives said they do not foresee any broader weakness in the tech IPO market.

During the bank's Oct. 24 third-quarter earnings call, management said there has been little impact on its portfolio from recent struggles among companies looking to conduct an IPO. Separately, executives said they expect the adoption of the current expected credit loss, or CECL, accounting standard to require a 7% to 16% increase in total reserves.

In recent months, several newly public companies, such as Uber Technologies Inc. and Lyft Inc., have lost significant value shortly after going public. And WeWork Cos. Inc. had to delay its IPO due to concerns over valuation and corporate governance. Those developments have raised speculation that other fledgling companies might struggle to achieve successful IPOs.

But SVB Financial CEO Gregory Becker said he was unconcerned about the developments and did not see any broader weakness in the startups that his bank finances.

"We've seen little impact at all from the few IPOs that are getting the attention. ... We have not seen a slowdown in liquidity. We've not seen a slowdown in activity," Becker said. "And we actually don't believe it's going to have a meaningful impact on the outlook. From our view, it's pretty isolated."

Becker said he did expect some valuations to decline and many boards to review governance structures, but he said that should be viewed as a healthy development.