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ROKU Relieved by Silicon Valley Bank Bailout Amid Losses
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Roku Inc. (ROKU - Free Report) , the maker of the streaming media player, said in a U.S. Securities and Exchange Commission filing that roughly $487 million, or 26% of its $1.9 billion in cash was tied up with SVB Financial Group’s Silicon Valley Bank, which has been closed down by California banking regulators, the second-largest bank failure in U.S. history after Washington Mutual in 2008.
The 16th largest bank in the U.S., with more than $200 billion in assets, was taken over by the Federal Deposit Insurance Corp, in a bid to protect depositors following a dive in the value of its investment holdings and a rush of withdrawal requests starting just two days ago.
ROKU has also claimed in a regulatory filing that the deposits with SVB were largely uninsured and it is unsure about the extent it would be able to recover them, but added that it believed it had enough cash for the next twelve months. Its remaining balance of $1.4 billion is distributed across other large financial institutions.
The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors. It will pay uninsured depositors an advanced dividend within this week and they will get a receivership certificate for the rest of their uninsured funds.
The past year has been a mixed bag for Roku. On the plus side, the number of active accounts rose 16% in 2022 to reach 70 million. Those accounts measured up to 23.9 billion streaming hours in the fourth quarter, up 23% year over year.
Despite of the boost in active accounts, Roku is struggling in advertising revenues as a potential recession has caused ad buyers to tighten their belts. As a result, average revenue per user rose just 2% year over year in the fourth quarter. Declining device sales caused fourth-quarter revenues to stagnate compared with the previous year's period.
Fourth-quarter operating expenses soared 71% year over year, while revenues remained flat. Instead of the modest profit reported in 2021, operations lost a frightening $250 million in the fourth quarter. Over the past year, as revenues stagnated, the company reported a $498 million net loss.
In November 2022, this Zacks Rank #3 (Hold) company laid off around 5% of its staff, but that might not be enough. The company forecast another net loss of $205 million in the first quarter of 2023. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SVB Collapse Sparks Concerns in Tech Sector
The surge in interest rates over the past year is only beginning to reverberate throughout the economy and the high borrowing costs could lead to a slowdown that further deflates the 2020/21 rally in highly valued technology stocks.
Dozens of companies have reported exposure to the bank, which in its four-decade history cultivated deep ties within the tech sector. Several companies disclosed in filings significant deposits in the bank.
Gaming platform Roblox (RBLX - Free Report) said in a filing approximately 5% of its $3 billion cash and securities balance was held at SVB as of Feb. 28, but added that it would not affect its daily operations.
The updates are a further indication of how closely connected the failed bank was with the larger tech industry and the further ramifications its closure could have on brand-name firms.
Circle, a blockchain-based payments company, wrote on Twitter that $3.3 billion of its USD Coin cryptocurrency was still held by the bank. Silicon Valley Bank was one of six banks the company used to manage roughly a quarter of the USDC reserves it kept in cash, Circle added.
iRhythm Technologies, which sells a wearable device that monitors cardiac patterns, said in a filing on Monday that about one-fourth of its $213.1 million cash holdings were in operating accounts held at Silicon Valley Bank. It also had a $35 million term loan outstanding with SVB. The company added that it had $134.3 million in short-term investments held in accounts outside of SVB that could be available in the near term, if needed.
As of yesterday, HSBC Holdings plc (HSBC - Free Report) announced that its UK ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited for £1. As of Mar 10, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending Dec 31, 2022, SVB UK recorded a profit before tax of £88m. SVB UK’s tangible equity is expected to be around £1.4bn.
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ROKU Relieved by Silicon Valley Bank Bailout Amid Losses
Roku Inc. (ROKU - Free Report) , the maker of the streaming media player, said in a U.S. Securities and Exchange Commission filing that roughly $487 million, or 26% of its $1.9 billion in cash was tied up with SVB Financial Group’s Silicon Valley Bank, which has been closed down by California banking regulators, the second-largest bank failure in U.S. history after Washington Mutual in 2008.
The 16th largest bank in the U.S., with more than $200 billion in assets, was taken over by the Federal Deposit Insurance Corp, in a bid to protect depositors following a dive in the value of its investment holdings and a rush of withdrawal requests starting just two days ago.
ROKU has also claimed in a regulatory filing that the deposits with SVB were largely uninsured and it is unsure about the extent it would be able to recover them, but added that it believed it had enough cash for the next twelve months. Its remaining balance of $1.4 billion is distributed across other large financial institutions.
The FDIC is acting as a receiver, which typically means it will liquidate the bank’s assets to pay back its customers, including depositors and creditors. It will pay uninsured depositors an advanced dividend within this week and they will get a receivership certificate for the rest of their uninsured funds.
Roku, Inc. Price and Consensus
Roku, Inc. price-consensus-chart | Roku, Inc. Quote
Can Roku handle more losses?
The past year has been a mixed bag for Roku. On the plus side, the number of active accounts rose 16% in 2022 to reach 70 million. Those accounts measured up to 23.9 billion streaming hours in the fourth quarter, up 23% year over year.
Despite of the boost in active accounts, Roku is struggling in advertising revenues as a potential recession has caused ad buyers to tighten their belts. As a result, average revenue per user rose just 2% year over year in the fourth quarter. Declining device sales caused fourth-quarter revenues to stagnate compared with the previous year's period.
Fourth-quarter operating expenses soared 71% year over year, while revenues remained flat. Instead of the modest profit reported in 2021, operations lost a frightening $250 million in the fourth quarter. Over the past year, as revenues stagnated, the company reported a $498 million net loss.
In November 2022, this Zacks Rank #3 (Hold) company laid off around 5% of its staff, but that might not be enough. The company forecast another net loss of $205 million in the first quarter of 2023. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SVB Collapse Sparks Concerns in Tech Sector
The surge in interest rates over the past year is only beginning to reverberate throughout the economy and the high borrowing costs could lead to a slowdown that further deflates the 2020/21 rally in highly valued technology stocks.
Dozens of companies have reported exposure to the bank, which in its four-decade history cultivated deep ties within the tech sector. Several companies disclosed in filings significant deposits in the bank.
Gaming platform Roblox (RBLX - Free Report) said in a filing approximately 5% of its $3 billion cash and securities balance was held at SVB as of Feb. 28, but added that it would not affect its daily operations.
The updates are a further indication of how closely connected the failed bank was with the larger tech industry and the further ramifications its closure could have on brand-name firms.
Circle, a blockchain-based payments company, wrote on Twitter that $3.3 billion of its USD Coin cryptocurrency was still held by the bank. Silicon Valley Bank was one of six banks the company used to manage roughly a quarter of the USDC reserves it kept in cash, Circle added.
iRhythm Technologies, which sells a wearable device that monitors cardiac patterns, said in a filing on Monday that about one-fourth of its $213.1 million cash holdings were in operating accounts held at Silicon Valley Bank. It also had a $35 million term loan outstanding with SVB. The company added that it had $134.3 million in short-term investments held in accounts outside of SVB that could be available in the near term, if needed.
As of yesterday, HSBC Holdings plc (HSBC - Free Report) announced that its UK ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited for £1. As of Mar 10, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending Dec 31, 2022, SVB UK recorded a profit before tax of £88m. SVB UK’s tangible equity is expected to be around £1.4bn.