Silicon Valley Bank employees who lost access to $25 million of wages earmarked for company stock purchases should now recover that money after the Federal Deposit Insurance Corp. determined the funds are insured.
(Bloomberg) — Silicon Valley Bank employees who lost access to $25 million of wages earmarked for company stock purchases should now recover that money after the Federal Deposit Insurance Corp. determined the funds are insured.
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 who participated in the stock-purchase plan have been unable to access cash that was withheld from their paychecks in the weeks preceding the lender’s collapse, said the people, who asked not to be named. That left their wages in limbo.
After reviewing the situation, the FDIC on Tuesday determined the funds — about $25 million — should be treated as insured deposits and returned to the employees, according to a spokesperson for the agency. The process should begin shortly, the spokesperson said.
First Citizens Bank, which bought SVB’s banking operations last month, didn’t immediately provide a comment on the FDIC’s determination. An SVB Financial Group representative declined to comment on the decision.
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
The FDIC’s determination avoids a potentially painful road ahead if SVB Financial were on the hook for the cash. Unsecured creditors of bankrupt firms routinely recover merely pennies on the dollar, and often wait months for any payout.
First Citizens Bank had earlier 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 previously said the stock-purchase plan “remains the responsibility of SVB Financial Group,” the bankrupt holding company.
The outcome is also likely better than if SVB had bought the shares for employees just before its collapse. The stock traded for more than $280 a share in the days before the crisis broke open. It’s now hovering around 60 cents.
(Updates throughout with FDIC determination that funds should be repaid.)
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