Silvergate Capital shares crater after crypto bank delays annual report

Shares in Silvergate Capital fell on Thursday after the bank delayed filing its annual 10-K report as it evaluates events that have occurred since the end of 2022.

The company, which provides banking services to crypto businesses, ended the day lower by 57.72%. This brought the loss so far this year to 67 percent. It has decreased 95.7% in the past year.

Silvergate said in a filing Wednesday that it needs additional time for its accounting firm to complete certain audit procedures and that it is “currently analyzing certain regulatory and other inquiries and investigations.”

Specifically, it cited “the sale of additional investment securities beyond what was previously anticipated” and “the impact that these subsequent events have on its ability to continue as a going concern.”

“The losses from the securities sale appear to be large enough to result in Silvergate shouting that it may now be less than well capitalized on its regulatory capital ratios,” JPMorgan analyst Steven Alexopoulos said in a note Thursday. “Given significant regulatory challenges (including the ongoing investigations by regulators) and business challenges (including the increasing liquidity challenges amid a crisis of confidence from digital asset customers), the Company is reevaluating its businesses and strategies.”

JPMorgan downgraded Silvergate shares on Thursday along with other Wall Street analysts.

Silvergate noted that its preliminary unaudited financial results for 2022, filed Jan. 17, included a net loss attributable to common stockholders of $948.7 million, compared with net income of $75.5 million in 2021.

Silvergate has faced several challenges since the end of last year, following the explosion of the crypto exchange FTX. In January, it suffered another 40% decline in a single day after reporting massive withdrawals in the fourth quarter, in light of the FTX collapse. Then in February, the Ministry of Justice opened an investigation into the bank’s dealings with FTX and its sister company Alameda Research.

The move in the shares weighed on Signature Bank, which also banks crypto startups. The stock hit a 52-week low intraday, falling as much as 7%

Coinbase also fell as much as 11%, but pared losses as the stock market rallied and ended the day down just 1.5%. The crypto services company said in a statement that it has de minimis corporate exposure to Silvergate and that it has stopped accepting or initiating payments to or from Silvergate. Hedge fund Galaxy Digital, stablecoin issuers Circle and Paxos and others have taken similar measures.

However, the move did not have a major effect on cryptocurrencies. Bitcoin and Ether both hovered on the flatline.