Silvergate Stock Plunges 65%: Why Investors Are Running for Cover

Summary

  • Silvergate Capital Corp. (NYSE: SI) saw its stock price plunge nearly 50% after delaying the submission of its annual 10-K report.
  • The lender is facing an existential crisis following the FTX fiasco in early November and is evaluating its ability to continue as a going concern.
  • JPMorgan analyst Steven Alexopoulos downgraded the financial services company to „underweight“ citing continued liquidity challenges.

Silvergate Stock Crashes After Delaying 10-K Report

Silvergate Capital Corp (NYSE: SI) was cut nearly in half this morning after it delayed the submission of its annual 10-K report. On Tuesday, Silvergate Capital said in a filing with the U.S. Securities and Exchange Commission (SEC): The Company is evaluating its ability to continue as a going concern [and] is in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces. The crypto bank is facing an existential crisis following the FTX fiasco in early November, which has resulted in it having to offload more assets than expected over the past two months, ultimately weighing on its capital ratio.

Downgrades From JPMorgan Analyst

Also on Thursday, JPMorgan analyst Steven Alexopoulos downgraded Silvergate stock to „underweight“ citing continued liquidity challenges. In its latest reported quarter, Silvergate Capital had $1 billion of loss while Coinbase also announced that it had stopped payments to or from the crypto bank. Analysts at Canaccord Genuity also downgraded Silvergate stock with their price target set at $9 per share.

Short-Sellers Contribute To Bank Run

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Short-sellers appear to have contributed to a bank-run of sorts with Silvergate reporting much greater levels of deposit outflows than anticipated during Q4 and this trend likely continuing into 2021. The crypto bank’s stock price is now down about 65% versus its year-to-date high due to these events unfolding rapidly over recent weeks .

Silvergate Capital Faces Existential Crisis

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The FTX fiasco was just one event which led Silvergate Capital into an existential crisis with other factors such as short sellers contributing heavily towards plummeting stock prices and increased deposit outflows over recent months being key contributors too. With analysts setting their price targets low for SI along with Coinbase cutting ties with them, things don’t look good for Silvergate’s future prospects as they try desperately to remain afloat as a going concern.

Conclusion

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Due to multiple delays, liquidity issues and short seller pressure, Silvergate’s stock has crashed by 65% since last week when compared against their year high value – making this one of their worst periods yet since they began trading publicly back in 2018 – despite strong performance until recently throughout 2020