> Curious what the efficient market hypothesis has to do with this?
Let's back away from SVB, because it's not currently traded.
In 2020 the car rental company Hertz went bankrupt. Nevertheless, the stock traded a low but non-zero price.
You can either say that people were crazy, or if you take the efficient market hypothesis to heart, you can see it as an indication that there was a positive probability that Hertz stock would be worth something after the bankruptcy.
As for the value investor perspective: for SVB you would try to come up with your own valuation, compare that to the market price (and thus market capitalisation), and if the latter was low enough, you'd buy.
As an efficient market guy, you'd skip the first step, and just assume that the market price is probably fair enough; and just buy an index fund that includes a small fraction of SVB.
If you're an efficient market hypothesis, you don't believe there is any value that can be had because it's completely built into the market, so there's no reason to pay attention to the news and just buy a fund in the first place.
This likely depends on which version of EMH you're referring to, and what information is "efficient", but typically speaking you don't care if things drop or rise because you believe that it's efficiently priced.
Can you help me understand where you and I differ?
Yes, details depend on exactly what version of EMH you'd subscribe to. I think we mostly agree.
One fairly sensible version of EMH is the notion that even an efficient market pays you to take certain risks. Eg an insurance company might be paid to take weather risk when they insure crops. If there's enough competition, that risk will be efficiently priced.
People can spend extra effort to learn more about crops or the weather, and thus get a better handle on the probabilities and variances. At some point you hit diminishing returns. Different people have different amounts of productivity, ie how much effort leads to how much improvement in understanding of risk. The market price will be driven by the most productive people and companies; because they hit diminishing returns last. (To give a silly illustration: I could spend a lot of effort trying to understand the weather better, but because I have no clue, that effort wouldn't do me much good. An expert will do much better. And so it's the experts who effectively set the price in competition with each other.)
The same applies for credit risks that a bank faces when it makes a mortgage loan.
In an efficient market, the risk for holding SVB stock would be priced efficiently. But you'd maybe want to investigate whether it's the kind of risk you want in your portfolio. Or, if your investigative abilities are at the productivity frontier, you might also want to just check out SVB in general, to see if the market price is slightly off compared to your expert judgement.
Let's back away from SVB, because it's not currently traded.
In 2020 the car rental company Hertz went bankrupt. Nevertheless, the stock traded a low but non-zero price.
You can either say that people were crazy, or if you take the efficient market hypothesis to heart, you can see it as an indication that there was a positive probability that Hertz stock would be worth something after the bankruptcy.
As for the value investor perspective: for SVB you would try to come up with your own valuation, compare that to the market price (and thus market capitalisation), and if the latter was low enough, you'd buy.
As an efficient market guy, you'd skip the first step, and just assume that the market price is probably fair enough; and just buy an index fund that includes a small fraction of SVB.
(SVB used to be in the S&P 500.)