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Roku Shares Slip After Disclosing 26% of Cash Held at Failed Silicon Valley Bank

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Roku Inc. (NASDAQ:ROKU) announced on Thursday that it had held approximately 26% of its cash and equivalents at Silicon Valley Bank (SVB), which failed and was closed down by California last Friday. Following this disclosure, Roku’s shares slipped by 3.5% in after-hours trading.

Of its total cash and equivalents of $1.9 billion, Roku held $487 million at SVB, and these deposits are mostly uninsured. The company stated that it is uncertain about its ability to recover its cash on deposit at SVB.

The Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver for SVB, and uninsured depositors, such as Roku, are expected to receive an advance dividend within the next week, with the possibility of future dividends.

Despite the bank’s closure and potential loss of funds, Roku expressed confidence in its ability to meet its working capital, capital expenditures, and material cash requirements from known contractual obligations for the next year and beyond.

This news comes as a blow to Roku, which has been on a strong growth trajectory, with the pandemic driving demand for streaming services. The company has been investing heavily in its platform, with the goal of becoming the go-to destination for streaming content.

Roku’s management is optimistic about the future, but this incident highlights the importance of prudent cash management and diversification of deposits. The company’s ability to recover its funds from SVB remains uncertain, but it has enough cash and cash equivalents to continue operating without interruption.

In conclusion, the news of Roku’s exposure to SVB and potential loss of funds has led to a decline in its share price. However, the company remains well-positioned to continue its growth trajectory and meet its financial obligations, despite this setback.

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