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(Reuters) - First Republic Bank shares plunged after a CNBC report that the lender was likely headed for receivership under the U.S. Federal Deposit Insurance Corporation (FDIC), worsening a rout that has wiped out 75% of the stock’s value this week.
If the San Francisco-based lender falls into receivership, it would be the third U.S. bank to collapse since March. First Republic said earlier this week its deposits had slumped by more than $100 billion in the first quarter.
The stock lost more than half of its value on Friday and touched a record low of $2.99. Trading in the bank’s shares was halted multiple times.
At its lowest, the bank had a market capitalization of nearly $557 million, a far cry from its peak valuation of more than $40 billion in Nov. 2021.
Short sellers - investors who set up bearish trades with the aim of booking profits from falling stock prices - have raised their bets against the bank by $63 million to $376 million over the past 30 days, according to Ihor Dusaniwsky, managing director of Predictive Analytics at S3.
A Reuters report of a government-brokered rescue deal for First Republic had pushed its shares up by as much as 6.6% earlier in the session.
First Republic stock performance month-to-date
According to the report, the FDIC, the Treasury Department and the Federal Reserve are among the government bodies that have started to orchestrate meetings with financial companies about a lifeline for the bank.
The government’s involvement was helping bring more parties, including banks and private-equity firms, to the negotiating table, the report said.
“The potential worst-case scenario stemming from the collapse of Silicon Valley Bank appears to have been averted,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.
“But the problems at First Republic are a reminder that further problems remain possible.”
Reporting by Medha Singh and Niket Nishant in Bengaluru; Editing by Saumyadeb Chakrabarty, Devika Syamnath and Anil D’Silva
