Investors of Silvergate Bank were crestfallen yesterday as their stock plummeted 57% after the company released late Wednesday of its inability to meet a March 16th deadline to file its annual report. Adding to the misery, the company noted that it must undergo further analysis and journal entries related to subsequent events. Furthermore, the company was subject to certain regulatory and other inquiries and investigations.
This recent collapse of Silvergate stock is the result of their entanglements with several crypto firms and their subsequent fall in deposits for the fourth quarter of last year. As a further measure to negate their losses, the company dismissed 40% of their staff and even suspended their dividend on preferred shares. In total, the stocks have declined a staggering 95% over the last year.
Apart from the financial woes, the bank was being pressured by a bi-partisan group of US Senators to answer whether it was aware its clients FTX were misusing customer funds. Additionally, a Reuters report said a Silvergate account controlled by Binance.US moved millions to a company led by Binance CEO Changpeng Zhao.
The bank also announced the sale of additional debt securities, to the extent of their expectations and further losses than previously disclosed. Moreover, the bank said it is evaluating its ability to remain a going concern for the next twelve months.
In light of these challenges, another report showed that the Federal Reserve has cautioned against banking institutions taking on crypto-related clients due to the heightened liquidity risks. With both private litigation and investigations from congressional inquiries, banking regulators, and the Justice Department, these calls are a legitimate concern.
Analysts at JPMorgan have downgraded the stock to Underweight from Neutral, citing a combination of trust in the system being shaken and short-sellers voicing their concerns.
Key Points:
- Silvergate stock plummeted 57% after the company released late Wednesday of its inability to meet a March 16th deadline to file its annual report.
- The company is facing financial challenges with deposits falling by more than two-thirds in the fourth quarter of last year.
- The company was being pressured by a bi-partisan group of US Senators to answer whether it was aware its clients FTX were misusing customer funds.
- The bank announced the sale of additional debt securities, to the extent of their expectations and further losses than previously disclosed.
- Analysts at JPMorgan have downgraded the stock to Underweight from Neutral.
tl;dr
Silvergate's stock dropped 57% due to financial and regulatory challenges. The company was being questioned over its involvement with crypto firms that misused customer funds. JPMorgan downgraded the stock to Underweight from Neutral.