• Jim Cramer, the host of CNBC’s Mad Money, advised people to buy Silicon Valley Bank (SVB) stock on February 8th despite its 40% increase in price.
• On March 8th SVB announced that it had sold a large portion of securities at a loss and plans to dispose of over $2 billion in new shares to fix its balance sheet.
• This announcement triggered panic among depositors who rushed to withdraw their funds, causing prices to crash and leading the Federal Deposit Insurance Corporation (FDIC) to take over the bank on Friday.
Jim Cramer Advises People To Buy Silicon Valley Bank Stock
Jim Cramer, the host of CNBC’s Mad Money, advised people to buy Silicon Valley Bank (SVB) stock on February 8th. He argued that the company was “less dependent upon private equity and venture capital offerings” and that its stock was “still cheap” despite being up by 40% year-to-date (YTD) at the time.
Silicon Valley Bank Announces Losses
On March 8th SVB announced that it had sold a large portion of securities at a loss and plans to dispose of over $2 billion in new shares to fix its balance sheet. This announcement caused stocks prices for SVB to plummet shortly after and sparked panic among depositors who rushed to withdraw their funds from the bank.
Federal Deposit Insurance Corporation Steps Up
The Federal Deposit Insurance Corporation (FDIC), an independent federal agency typically tasked with insuring deposits in banks and thrift institutions, stepped up in response. During trading on Friday they took over Silicon Valley Bank as they sought protect depositor funds.
Shares Halted
The shares in question which Cramer touted as “cheap” only a month ago were halted on Friday due FDIC takeover of SVB.
Cramer’s Advice Criticized
Jim Cramer continues with his controversial advice often facing criticism from social media users for suggesting investments that turn out unprofitable or vice versa. This case is no exception as many are now questioning his judgement with this particular recommendation for SVB stock before its collapse last week.