When a huge financial institution, like the crypto-focused Silvergate bank, has its name in the list of accomplices, it knowingly or unknowingly affects its image and, therefore, shares prices fall dramatically. Silvergate Capital (SI) has suffered as it has been performing poorly; although few analysts thought it to recover, the herd is growing thin. Analyst Michael Perito at Keefe, Bruyette & Woods (KBW) had lowered the price target to $16 from $25 as per a research note sent to clients.
Perito wrote in a note saying.
“With limited earnings and fundamental visibility over the past two months, we believe a market perform rating is more reflective of the risk/reward profile for SI at this time, with a wide range of outcomes possible over the coming months.”
At the time of writing SI was trading at $13.91 with a slight jump of 0.22%. Previous close and open were at $13.88 and $13.85, respectively. The fifty-two-week change was negative 89.58%. The market cap was strong at $440.371 million; at the same time, its volume was $6.20 million, and the average volume was $12.14 million. Still, analysts have a 2.10 rating for hold, hoping for a recovery. The short interest appears healthy, with 61.94% of shares sold short. The revenue of the crypto bank was negative $600.95 million.
The chart shows a massive drop in price action year-to-year, an 89.08% drop. With fundamentally limited possibilities for recovery anytime soon. This, however, does not mean that the analysts have completely given up on SI. The drop in share prices could also be due to its role in FTX’s platform, where the bank facilitated many accounts owned by Alameda and FTX for internal funds transfer.
Possible Reasons
Although the bank seems to be fighting the odds and its management, operating platform and strong balance sheets could still put them on track. But the highly volatile market had its nature fueled by the FTX collapse and other similar incidents, creating a scenario where fundamental valuation models proved to be a challenge, at least for the next 12 months.
In January 2022, Perito again changed the Silvergate ratings, where he upgraded the shares, trading around $100 at the time, to outperform and might reach the $225 price mark.
Silvergate vs. FTX & Alameda
Although the crypto bank is not accused of anything, it is being questioned for its role in the FTX, Alameda and Sam Bankman-fried other businesses. Silvergate facilitates various accounts of the bankrupt crypto exchange and its accomplices, which were allegedly used to transfer users’ funds internally. They were asked if they knew their accounts were used for fund transfers. Following the collapse, the bank saw a $1 billion loss in Q4 2022 and had to fire 40% of its staff.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2023/03/01/silvergate-down-by-89-58-since-last-year-kbw-analyst-downgrades/