SVB Financial Group (SVB), which does business as Silicon Valley Bank (SVB), scrambled on Thursday (March 9) to reassure clients that their money with the bank was safe after a capital raise caused a steep 60 percent collapse in its share value, wiping out over $80 billion in value from bank shares.

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SVB had launched a $1.75 billion share sale on Wednesday to shore up its balance sheet. As per an investor prospectus the bank needed the proceeds to plug a $1.8 billion hole caused by the sale of a $21 billion loss-making bond portfolio mostly consisting of US Treasuries, Bloomberg reported.

The portfolio was yielding an average 1.79 percent return which was far below the current 10-year Treasury yield of around 3.9 percent.

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What happened at the Silicon Valley Bank and why does it matter?

However, investors in SVB's stock fretted that the capital raise would be sufficient given the deteriorating fortunes of many technology start-ups that the bank serves. The company's stock collapsed to its lowest level since 2016, and its shares slid another 26 percent in extended trade after the market closed.

It’s hard to build a business. My sympathies are with Silvergate and SVB, both of which served many customers through good times and bad.

I hope SVB pulls through. And that we can eventually build a system that isn’t subject to the vicissitudes of fractional reserve banking.— Balaji (@balajis) March 10, 2023

The ramifications of the crisis have spread to Sweden — SVB's plunge wiped out more than half of the value of the holdings that Alecta — Sweden's largest pension fund — had in the bank. According to a Bloomberg report, Alecta, the fourth largest shareholder in SVB, lost 54 percent in terms of value of its stake after the Californian bank lost 60 percent in stock value on Thursday.

Reuters reported that SVB's CEO Gregory Becker has been calling clients to assure them their money with the bank is safe, citing sources.

Since the collapse began, some start-ups have been advising their founders to pull out their money from SVB as a precautionary measure. As per the report, one of them is Peter Thiel's Founders Fund.

Social media has been abuzz as the news broke. One user said "if SVB fails, it could be a Lehman moment for the startup world."

Most people don't realize how crucial Silicon Valley Bank is.

Billions of dollars in venture debt. Untold amounts of warrants and convertible notes in early-stage firms.If SVB fails, this could be the Lehman moment for the startup world. pic.twitter.com/otgIQtGOMx— Peruvian Bull (@peruvian_bull) March 10, 2023

While another commented that “We got ourselves a bank run” referring to the large group of investors pulling their money from the bank.

PETER THIEL’S FOUNDERS FUND ADVISES COMPANIES TO WITHDRAW MONEY FROM SILICON VALLEY BANK - Bloomberg$SIVB -60.4% today, and another -17% after hours

$169b in deposits, we got ourselves a bank run— Dylan LeClair