Etsy's bank fails... what next?

[#1]

The collapse of Silicon Valley Bank today is awful news.  I wonder what this means for Etsy sellers and funds.  

https://www.wsj.com/articles/after-silicon-valley-bank-fails-tech-startups-race-to-meet-payroll-4ebd9c5c

[UniqueGiftOrnaments]

 @CraftyCraftsCorners    Great. I have Wells Fargo, but that sounds like just a glitch.

I just hope people don't panic and make a run on their banks.

[EnergyPeace]

@UniqueGiftOrnaments I do too but only have one direct deposit once a month so currently not affected.

This is a big difference with a glitch compared to a bank shutting down. 

[PatentEarth]

Until Etsy sees fit to provide more details about who they bank with and how much this bank failure affects them, it's anybody's guess when we'll all start getting paid again. Personally I'm not too worried, as most of my money comes from 'zon so I'm used to waiting 2+ weeks to get paid, and I don't expect Etsy payouts to be stalled out that long.

According their financials, Etsy has some $200M in untapped credit. And Silicon Valley Bank actually has some $200B assets VS some $175B in outstanding deposits, much of it invested in low yield investments that nobody is eager to buy right now because inflation is so high (which is why they couldn't handle the bank run), but it should still pay out in the long term. If I understand correctly, the FDIC might fire sale those investments at a discount so SVB depositors may not get all their money back, but they'll likely get back *most* of their money (well over the standard $250k FDIC limit at least).

So Etsy has their $200M line of credit and can probably get bridge loans for at least a portion of what they have tied up in SVB deposits. The big question is how much of their money ($920M+ in cash as of 2022) did they have in SVB. I *assume* that a billion dollar publicly traded company would spread it's money around so hopefully not too much of it is wrapped up in this mess.  In theory, they should still have hundreds of millions in cash on top of the $200M line of credit and bridge loans, so this likely is a more technical issue of routing the deposits than a problem with coming up with the money.

Ultimately, I wouldn't expect the deposit delays to last too long. Etsy should be able to get their hands on the cash one way or another, and it's basically a hair-on-fire emergency for them so I imagine they've got all hands on deck trying to sort it out.

What I do worry about is what kind of shenanigans they might resort to if their cashflow is hit hard enough. If it turns out they had hundreds of millions tied up with SVB, I won't be surprised if suddenly my ad CPC's spike and Etsy comes up with some excuse to slap a new reserve on my account...

[EvasFeathers]

Hopefully! It could be that Etsy has used SVB from back when Etsy was still a startup itself since SVB specializes in startups.  It could be that SVB was their main 'checking account' for paying sellers and they just need to set up something with a diff bank asap and redo the software transfer system.   Even if they have tons of money in other places, it will need to be connected to the current system.  Etsy probably needs to speak with banks about terms and compare, its lawyers need to read the contracts and get signature, the software has to be changed and tested, etc.  Even if they have plenty of money, they are going to need some days to do all that.  Worse case scenario, Etsy lost a lot of money at SVB and is working on a loan agreement with a new bank right now and down the line they'll get some of that lost money back but not a lot of it. But they still have daily positive cash flow and combine that with their bank loan option and they should be able to stay solvent and actually still be in a better position than when they were a startup.  Their infrastructure and customer base is already solid now, they are probably in the green on a daily basis as far as income vs expenses.  They made billions last quarter and were buying back a lot of their stock.  

[EnergyPeace]

several mention this 200 million line credit. Is this because you know for a fact that this line of credit wasn't issued by their bank that just went under?

[TinLizziAntiques]

OP, the FDIC today said that all account holders whose accounts at SVB are under the $250,000 ceiling for insured deposits will be able to withdraw money on Monday, March 13. Hopefully, Etsy's accountants spread any money among accounts that did not exceed the insured level. It doesn't take an MBA to understand banking rules and safety in insured deposits.

[EnergyPeace]

I don't think large companies such as Etsy can stick to keeping the amount under 250K in each bank. It can be hard even for individuals to do so. I am sure they will take a loss, question is more; were most of their assets held there including their line of credit or just a smaller part of it, or something in between? 

[TheCuriosityGoods]

Accounts are insured at 250,000 each.  So if you hold 3 accounts each one is insured. A lot of businesses hold multiple accounts in order to ensure the FDIC insurance is there. It’s still a mess though. It can still cause consumers to panic in the confusion. The stock market hasn’t been doing well either.  I hate to say it but I’m starting to think we need to buckle up. 

[FourDaisiesDesigns]

It is actually per depositor, per FDIC insured bank, per ownership category. So three individual checking accounts owned by the same person would only be covered up to $250,000.  

[FeltOnTheFly]

@MicheleMade, do you know who PayPal uses for banking?

[UniqueGiftOrnaments]

@FeltOnTheFly   I think Paypal is sort of like Plaid. It is an online payment platform that facilitates payments and uses quite a number of banks.

[MicheleMade]

Edited: Whoops...I'm thinking of my own online shops and stores, but this actually answers the question: do eBay sellers need to worry about SBV...I just looked it up. When eBay decided to end their relationship with Paypal in 2018, they went with a small European company called Adyen. This is who they use for their payment processor. I haven't looked up newer info yet. I have an eBay store and I haven't noticed any messages from eBay saying that the SVB failure would be an issue for sellers.

[MicheleMade]

Just as UniqueGiftOrnaments said, it looks like PayPal partners with different banks to offer a variety of products and services. I saw Bancorp and Synchrony mentioned in search results just now.

[CraftyCornishMaids]

@MicheleMade 

etsy uses Ayden too, and worldpay, and stichting custodia, etc etc

[SmallthingsbyAmanda]

etsy also uses Ayden

[plyeffects]

They actually use more than one bank. The current one they seem to favor is Synchrony.

[onedaysgracenz]

Interesting development in the fortunes of Etsy!  Etsy does use other banks, which is not to say they are going to be much short of panicked in the short term. They'll have to raise capital elsewhere to cover the time frame of the fallout from SVB, even if everything is straightforward as far as Etsy is concerned, there will be delays in funds being released to depositors.

FDIC will have to gather info and get a complete understanding of the situation before they take any actions - and I doubt that will be an overnight exercise, even if they started on Wednesday when SVB started to go belly-up.

For all we know at this stage, Etsy could have been one of the many companies who made a run on the bank and withdrew any uninsured deposits they might have had before all SVB activity was frozen.

[junkbay]

I am no longer very optimistic. The Feds are only guaranteeing money up to 250K Tech companies are going to go under, hopefully, ETSY isn't one of them. This appears to be pretty bad

[junkbay]

Someone mentioned Synchrony as an alternative. They pulled my credit line out of the blue on me, Thursday morning. Looks like they were tied to this bank

[EnergyPeace]

@junkbay interesting about Synchrony. I haven't received a message from them but I have carecredit with Synchrony. I haven't used it for several years. I wonder if I still have my credit line there!

[MrsDsHandKnits]

Unnecessary panic and screaming "The sky is falling,the sky is falling!"  is pointless...until this is sorted,there is nothing anyone can do except hang in there, wait & see and have P-A-T-I-E-N-C-E!

[CryzalisDesigns]

Hope they do not have any of their other accounts with the First republic bank 

[kittenkat22]

https://www.valueaddedresource.net/etsy-sellers-funds-frozen-in-silicon-valley-bank-collapse/

[onedaysgracenz]

@kittenkat22- that's hardly a "report" on anything. It's a copy of Etsy's forums!!

All funds are frozen at SVB until the receivers get a handle on the situation. That does NOT mean funds are lost, especially those that are insured.

[NixAeterna]

Some further insight into how the bank went under... https://archive.is/RlymY (archived from the Daily Telegraph in the UK).

Now the UK branch is going under, too... https://sifted.eu/articles/silicon-valley-bank-uk-falls-news/

Time to open that Shopify store?