Ken Griffin Is Betting Big on Western Alliance (WAL) Stock

The recent collapse of  SVB Financial’s (NASDAQ:SIVB) principal subsidiary, Silicon Valley Bank, has left many investors with deep concerns regarding the banking sector. The dust is still settling from the crisis as many bank stocks struggle to regain the ground they lost last week. It’s a hard time for risk-averse investors to be betting on the sector, particularly as speculation mounts that other banks will fail. This includes Western Alliance Bancorp (NYSE:WAL), a bank holding company with some troubling parallels to SVB. But one Wall Street icon isn’t worried about the company’s future. In fact, Citadel founder Ken Griffin recently revealed a sizable bet on WAL Stock. 

Does this mean that Western Alliance is out of the woods and headed for a turnaround? Let’s take a look at Griffin’s decision and see what investors should be expecting.

What’s Happening With WAL Stock

News of Griffin’s investment may have helped the company today. WAL stock has been volatile since markets opened despite some progress yesterday, but it is currently rising. As of this writing, it is up 8% for the day. While it was down earlier today, that can likely be attributed to general negative market momentum. Fellow bank stocks First Republic Bank (NYSE:FRC) and PacWest Bancorp (NASDAQ:PACW) are both very deep in the red.

On Monday, as the banking sector turmoil increased, Citadel disclosed a regulatory filing with the Securities and Exchange Commission (SEC). According to the 13G form, Griffin’s fund has added 5,781,968 WAL stock shares. This amounts to roughly a 5.3% stake in the company. Doubling down on stocks like this is commonplace for the large-scale hedge fund. But taking out a stake in a company that is big enough to require a separate regulatory filing is significantly rarer. Citadel had previously held a small position in WAL stock, with holdings of roughly 1.31 million. Per Markets Insider:

“The buy by Citadel was seen as a signal of confidence by investors on Tuesday, with shares of Western Alliance soaring as much as 52%. The spike far outpaced the 8% gain seen in the S&P Regional Banking ETF, and was on par with gains seen in other regional banks that nearly imploded over the past few days, like First Republic and PacWest Bancorp.”

Unfortunately for both companies, the fact that most bank stocks are down today signals that markets are still not shifting in favor of the sector. The carnage of the SVB collapse is still casting dark clouds over Wall Street as investors wait to see if other banks will fall. It’s also worth noting that while other institutional investors have maintained their bets on WAL stock, the sector as a whole remains highly questionable.

What Comes Next

Currently, it’s hard to know when the dust will settle from the SVB catastrophe. While the U.S. government stepped in to bail out SVB depositors, there remain many questions about how things will be handled and if further regulatory measures against the banking industry will be taken. Griffin’s WAL stock will likely help inspire confidence in the struggling bank. However, other investors will probably need to see actual progress before their confidence is restored.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

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