So, I have what I think is a fair grasp of the fundamentals of yesterday's Silicon Valley Bank insolvency.

The clearest, most succinct explanation I've seen is from today's The Rational Walk.

From the section dealing with accounting handling of Hold 'Til Maturity (HTM) bonds:

"When management is forced to liquidate securities classified as HTM, the unrealized losses become realized. In addition, the status of the remaining HTM portfolio is called into question. Rather than being held to maturity, those securities suddenly must be regarded as available for sale. As soon as this happens, they must be marked to market on the balance sheet and the bank's stockholders' equity plummets."

(The whole article highly recommended: rationalwalk.substack.com - The fall of silicon valley bank Ungated, I think) (Hint: click on the minuscule tables and they'll pop open in a much larger window)

But I'm hoping one of the wiser heads on this board could - using terms adapted to the meanest understanding - explain this sentence from today's NYT:

"The bank and its advisers may have also made a tactical mistake: The...equity investment could have been completed overnight, but the bank's management also chose to sell convertible preferred stock, which couldn't be sold until the next day. That left time for investors ' and, more important, clients ' to start scratching their heads and sow doubt about the firm..."

From an SVB board perspective, what were the advantages of raising a portion of the suddenly-needed capital via convertible preferred stock? (Presumably with the alternative being just immediately issuing more common shares from their treasury?)

-sutton
happy to ask dumb questions since, well, learning to talk