Moody’s Downgrades Struggling Silvergate Ratings Adding Further Woes

• Ark Invest, Cathie Wood’s investment vehicle, reportedly sold more than 400,000 shares.
• As of January 5th, it was reported that Silvergate Bank had lost $718 million.

Moody’s downgrade and Ark Invest selling off of Silvergate Bank’s shares indicate deteriorating conditions at the financial institution. There was a run on the bank and it has been linked to the FTX crash.

Ark Invest, Cathie Wood’s investment vehicle, reportedly sold more than 400,000 shares of parent firm Silvergate Capital on January 6 for $4.3 million, leaving it with just 4,000 shares. The value of those shares dropped by 43% the day before.

Negative Outlook 

Silvergate Capital and the bank itself both saw ratings cuts from Moody’s Investors Service in response to the crisis at the bank. A negative outlook was placed on both the bank’s long-term deposit rating (formerly Baa2) and its long-term issuer rating (previously Baa2), both of which were lowered from Baa2 to Ba1 (“junk”).

Moody’s said it made the call because of dwindling deposits, losses from selling securities to fulfil liquidity requirements, and staff reductions.

Sadia Nabi, vice president of Moody’s, issued the following comment:

“Almost all of the bank’s deposits continue to be from crypto currency centric institutions, and while the bank currently has adequate liquidity and capital, continued large outf[l]ows of these deposits would further adversely impact the bank’s f[i]nancial condition.”

As of January 5th, it was reported that Silvergate Bank had lost $718 million due to their debt liquidation to fund $8.1 billion in withdrawals. Approximately 200 employees, or 40% of the total, were let go. Moreover, fourth-quarter 2022 deposits relating to cryptocurrencies were down 68% from the previous year.

After claims surfaced that the bank facilitated transactions between FTX and its sister business Alameda Research, it came under the attention of lawmakers.

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