Short-seller Jim Chanos wrote in a March 13 client letter seen by Reuters that investors had known about the underlying balance sheet problems that brought down SVB since last summer. But it was only when the bank, which his fund was short, “abruptly tried, and failed, to raise capital … that anyone cared.”
The crisis of confidence in U.S. regional banks started when shares of SVB plunged and depositors fled after it announced plans on March 8 to raise capital to fill a nearly $2 billion hole from the sale of securities. These included: William C. Martin, who shorted SVB in January 2023; Nate Koppikar of Orso Partners, who shorted SVB in early 2021; Barry Norris of Argonaut Capital Partners, who shorted SVB in late 2022; John Hempton of Bronte Capital Management, who shorted Signature in late 2021; and Marc Cohodes, who shorted Silvergate Bank in November 2022, according to interviews with Reuters.
Data from S&P Global Market Intelligence and ORTEX, who use different methodologies, have similar numbers showing SVB, First Republic and Signature with relatively low overall short levels before the crisis. An exception was Silvergate, a cryptocurrency-focused lender, which for months faced an unusually high level of short interest compared to other banks – above 75% by the time it said it would wind down operations on March 8.