Silicon Valley Bank employees who participated in a company stock-purchase plan are unable to access cash withheld from their paychecks in the months preceding the lender’s collapse, leaving millions of dollars of wages in limbo.
(Bloomberg) — Silicon Valley Bank employees who participated in a company stock-purchase plan are unable to access cash withheld from their paychecks in the months preceding the lender’s collapse, leaving millions of dollars of wages in limbo.
The bank previously let its workers buy SVB Financial Group stock at a discount of at least 15% every six months using money set aside from each paycheck, according to regulatory filings. Because of this structure, the money withheld from paychecks since the start of the year hadn’t yet been used to buy shares when the bank failed on March 10, according to people familiar with the matter.
Employees haven’t been able to withdraw those funds since then, and they don’t know when — or if — they’ll get the money back, said the people, who asked not to be named.
SVB and First Citizens Bank, which bought the lender last month, declined to comment. The Federal Deposit Insurance Corp. is reviewing the issue, according to a spokesperson for the agency.
SVB took in $44 million of cash from employees in connection with the stock-purchase plan in 2022, according to regulatory filings. The employee stock-purchase plan, or ESPP, was capped at $25,000 per year for each person. The enterprise had about 8,500 full-time employees at the end of last year.
Road Ahead
First Citizens Bank has told plan participants that it is working with the FDIC and SVB’s former parent company on a resolution, according to a message seen by Bloomberg. But it also said the stock-purchase plan “remains the responsibility of SVB Financial Group,” the bankrupt holding company.
If SVB Financial is on the hook for the cash, employees could have a tough road ahead. Unsecured creditors of bankrupt firms routinely recover merely pennies on the dollar, and often wait months for any payout.
But anything that employees get back will likely be more than they’d have if SVB had bought shares on their behalf. The stock traded for more than $280 a share in the days before the crisis broke open. It’s now hovering around 60 cents.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.