Silvergate Dangles Dividends: Preserving a Liquid Balance Sheet

  • Announced halting dividends on 5.375% fixed rate of series A stock on January 27, 2023. 
  • They laid off 40% of employees on January 5, 2023.
  • The stock has been down by 60% in 12 months.

The crypto bank Silvergate is in the crosshairs for its involvement in the FTX saga and is trying everything possible to stay afloat and let the storm pass. They recently suspended the dividend payouts to preserve their “highly liquid balance sheet.”

It made an announcement on January 27, 2023, stating that it is halting “the patent of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, to preserve capital.”

Explaining the decision, Silvergate said that this was done to halt and let the crypto winter blizzard pass. Furthermore, they have a cash position that exceeds the digital assets for customer-related deposits. 

“This decision reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry.”

At the same time, the Company’s Board of Directors would team up to re-evaluate the quarterly payments of the said dividends as and when the conditions in the market evolve. 

In their fourth-quarter report on January 17, 2023, Silvergate reported a massive loss of $1 billion net. At the same time, the announcement followed the report by 11 days. Due to their market performance, sentiments have not been great recently, so much so that investors started opting for a “risk-off” approach in 2022.

CEO of Silvergate, Alan Lane, was seen using somewhat similar language in the fourth quarter report. At the time, the company was still positively bullish on the crypto sector but is actively working to maintain “a highly liquid balance sheet with a strong capital position.”

Such news negatively impacted its stocks, which, as expected, caused considerable losses in both preferred (SI-PA) and common (SI) stock prices. 

At the time of writing, Silvergate (SI) was trading at $13.58 with a correction of 3.67%. The 52-week range is from $10.81 to $162.65, but the current price is at the lower end of the spectrum. With 9.75 million shares out, it has a market cap of $429.94 million. 

Experts estimate the price target to be $36.18, which would be a 166.4% upside from the current scenario. At the same time, the highest value would be around $150.00, and the lower value to be around $13.00. At the same time, the projected earning growth would be 55.32%, from $0.47 to $0.73 per share. 

SI-PA dropped massively by 22.71% to around $8.85. When data for the last 12 months is studied, their prices dropped by 60% and 87.46%, respectively. 

On January 5, 2023, the company had to let go of 200 employees, thinning its workforce by 40%. These efforts are done to stay afloat and reach a point from where they can bounce back. 

Nancy J. Allen
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