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Shares of Silvergate Capital fell Thursday after the bank delayed filing its annual 10-K report as it takes stock of events that have occurred since the end of 2022.
The company, which provides banking services to cryptocurrency companies, fell 45% after falling 48.8% earlier in the day. The move took its year-to-date losses to 57%.
Silvergate said in a fill-in on 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 of these subsequent events on its ability to continue as a going concern.”
“Losses from securities sales appear large enough to lead to Silvergate claiming that it may now be less than well-reliant on its regulatory capital ratios,” JPMorgan analyst Stephen Alexopoulos said in a note Thursday. “Given significant regulatory challenges (including pending investigations from regulators) and business challenges (including exacerbating liquidity challenges amid a crisis of confidence from digital asset customers), the company is re-evaluating its business and strategies.”
JPMorgan downgraded Silvergate shares on Thursday along with other Wall Street analysts.
Silvergate noted that its preliminary unaudited financial results for 2022, presented on January 17, included a net loss attributable to common shareholders of $948.7 million, compared to net income of $75.5 million in 2021.
Silvergate has faced many challenges since the end of last year, following the explosion of cryptocurrency exchange FTX. In January, it suffered another 40% drop in a single day after massive withdrawals were reported in the fourth quarter, in light of FTX’s collapse. Then in February, the Justice Department opened an investigation into the bank’s dealings with FTX and its sister company, Alameda Research.
The move in its shares affected Signature Bank, which also works on emerging cryptocurrency banks. Its stock hit a 52-week low on the day, and recently fell nearly 6%.
Coinbase is also down about 7%. The crypto services company said in a statement that it has minimal exposure of the company to Silvergate and that it has stopped accepting or initiating payments from or from Silvergate. Hedge fund Galaxy Digital and stablecoin issuers Circle and Paxos have taken similar action.
However, this move did not have a significant impact on cryptocurrencies. Bitcoin and ether were both hovering just below the flat line.
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