There are stocks to buy and hold for decades as a wealth-building strategy. SVB Financial Group (OTCMKTS:SIVBQ) stock definitely doesn’t fall into that category. SVB Financial Group’s subsidiary Silicon Valley Bank is the poster child of bank failures in the 2020s. Still, you can still have fun trading the company’s shares — and, if you’re lucky, book profits along the way — as long as you exercise due caution.
The failure of Silicon Valley Bank was so spectacular that it might actually prompt changes in America’s financial laws and regulations. Yet, while the headlines buzz about the aftermath of SVB Financial Group’s collapse, few commentators seriously discuss investing in the company’s stock now.
It might actually be worth considering, as long as you take the right approach. So, let’s start off with a quick review of SVB Financial Group and how you can own a stake in the company, if you dare.
The Shameful Journey from SIVB Stock to SIVBQ Stock
The Wall Street Journal has a handy timeline of the events that led to the collapse of SVB Financial Group in March. I’ll sum it up now, with a few additions of my own:
- Silicon Valley Bank catered to tech startups and invested too much of the depositors’ funds into government bonds.
- The value of those bonds cratered because the Federal Reserve raised interest rates sharply. Consequently, Silicon Valley Bank’s net worth declined dramatically.
- A large number of depositors all tried to withdraw their funds at the same time. Silicon Valley Bank, with its reduced net worth, had difficulty honoring those withdrawal requests.
- There would have been a public outcry if the government bailed out the bank but left the depositors high and dry. So, the Federal Deposit Insurance Corporation (FDIC) took control of Silicon Valley Bank and effectively seized its assets.
- The Nasdaq exchange halted trading of and then delisted SIVB stock. First Citizens Bank (NASDAQ:FCNCA) bought Silicon Valley Bank from the FDIC for $500 million worth of First Citizens shares. SVB Financial Group could then be traded on an over-the-counter (OTC) exchange, under the ticker symbol SIVBQ.
So, there you have it. Now, it’s just a question of whether to buy now or run for the hills.
SIVBQ Stock Is Cheap for a Reason
SVB Financial Group shares recently traded at less than $1 apiece, which might sound like a bargain. However, if you’re thinking about making a large-scale share purchase, consider the wise words of InvestorPlace News Writer
“[C]onsider everything that has happened to Silicon Valley Bank. It is astounding that the company is allowed to trade at all . . . It single-handedly generated the worst banking failure since the financial crisis of 2008.”
That’s a fair point, and sensible investors probably don’t want to maintain exposure to a scandalous financial-sector failure over the long term. Moreover, prospective SVB Financial Group shareholders should bear in mind that neither bank depositors nor the government is in a charitable mood now.
On the other hand, markets don’t always move on fundamentals in the short term. Retail traders might send SIVBQ stock to the moon sometime this year. Ask yourself: Did they need a justification to push Carvana (NYSE:CVNA) stock from $30 to $360? Of course not. For all I know, SVB Financial Group’s shareholders might also get a lucky break.
Should You Actually Buy SIVBQ Stock?
Don’t get the wrong idea here. I’m not actually recommending that anyone should buy and hold a share position in SVB Financial Group. The risk level is too high with this stock.
A micro-sized stake should be fine, however, as a retail-trader-fueled moonshot could happen in the coming months. So, feel free to have fun with a few shares of SIVBQ stock. You might double or triple your money — or your trade could fail miserably, much like Silicon Valley Bank did.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.