Silicon Valley Bank has abandoned its efforts to raise $2.25bn in new funding to cover losses on its bond portfolio and is looking for a buyer as it faces outflows from deposits.

SVB shares were halted during early trading on New York’s Nasdaq exchange, as its management tried to reassure investors.

California-based SVB had hoped to announce the completion of a $2.25bn share and convertible bond sale before the market opened in New York on Friday but has now paused the effort, according to people with knowledge of the matter.

New capital from the stock sale would have helped bridge the roughly $1.8bn in losses SVB incurred from the sale of about $21bn of securities initiated to cover customers withdrawing deposits from the bank.

It planned to sell $1.25bn of its common stock to investors and an additional $500mn of mandatory convertible preferred shares, which are slightly less dilutive to existing shareholders.

SVB did not immediately respond to a request for comment. Its employees on Friday were asked by the company to work from home while the bank’s management team, led by chief executive Greg Becker, engages in conversations about potential next steps, according to two people familiar with the matter.

The banking group’s troubles stem from a decision made at the peak of the tech boom to park $91bn of its deposits in long-dated securities such as mortgage bonds and US Treasuries, which were deemed safe but are now worth $15bn less than when SVB purchased them after the Federal Reserve aggressively raised interest rates.

On Thursday, SVB and its underwriter Goldman Sachs raced to complete the share offering. While Goldman had secured enough interest in the convertible bond deal by mid-afternoon, the common stock sale was struggling as SVB shares slid, according to one person with knowledge of the matter.

Private equity firm General Atlantic had committed to provide $500mn in equity if the offering had been completed. Goldman Sachs briefly worked to assemble a broader group of private capital investors, but that plan did not materialise because SVB’s shares fell so sharply, according to sources briefed on the matter.

The bank’s shares registered their biggest-ever decline on Thursday, wiping $9.6bn from the banking group’s market capitalisation. SVB shares had fallen more than 60 per cent in pre-market trading on Friday before the halt was announced.

By Friday morning, the sale of shares and convertible bonds had been postponed, according to people familiar with the matter.

The ramifications of SVB’s troubles may be widely felt. The lender is the banking partner for half of US venture-backed tech and life sciences companies, and is a large presence in offering credit lines to the $10tn private capital industry.

Its customers have begun to grow increasingly fearful of the bank’s financial position, with some start-ups growing concerned enough to pull their cash.

Some venture capital groups told the Financial Times they were concerned by the decline in the value of SVB’s shares and were advising some of their portfolio companies to consider withdrawing a portion of their deposits from the lender. However, others said they were not giving that advice to their portfolio companies.

“SVB’s 40 years of business relationships supporting Silicon Valley evaporated in 14 hours,” said a senior executive at one multibillion-dollar venture capital fund. He said his firm had cautioned start-ups in which it invests to be “level-headed” and not to fuel a run on SVB on Thursday.

SVB’s decline, which was sparked by fears over interest rate-fuelled losses, has sparked contagion among financial stocks more broadly, drawing attention to the potential effect that rising interest rates could have on net interest income at other banks.

The four biggest US banks — JPMorgan Chase, Citigroup, Wells Fargo and Bank of America — also lost $52.4bn of market value in Thursday trading.

Some smaller lenders, particularly those in California, fell sharply in early Friday trading. PacWest Bancorp fell as much as 25 per cent, while First Republic, a competitor to SVB, dropped more than 40 per cent before recovering most of its losses.

Reporting by Eric Platt, Ortenca Aliaj, Antoine Gara and Joshua Franklin in New York and Tabby Kinder and George Hammond in San Francisco. Additional reporting by Brooke Masters and Stephen Gandel in New York