The abrupt collapse of Silicon Valley Bank last week came as a surprise to nearly all the denizens of the venture-capital world, including people who’d become extravagantly wealthy in no small part because the Santa Clara, Calif., bank had lent to them when few others would. Without Silicon Valley Bank, the tech boom of the past few years might not have even been possible.
Despite all the big brains who did business with the tech-industry stalwart, almost no one seemed to be aware that the bank would have been in deep trouble months earlier had it not been for an arcane accounting rule that allowed it to ignore the losses (then still on paper) in its investment portfolio.
But there were a few investors who did see the bank’s collapse coming. “Silicon Valley Bank’s failure is just what happens when a tech bubble bursts,” says Nate Koppikar, co-founder of San Francisco–based hedge fund Orso Partners, who was short (that is, betting against) the bank’s stock for more than a year before it failed. Not many others in the financial world had made the same bet: When Silicon Valley Bank was shuttered by the federal government, only 5.5 percent of its outstanding shares had been sold short, according to S3 Partners, which tracks short selling.
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Michelle Celarier 