Silvergate Capital (SI) was downgraded to “Underweight” from “Neutral” by JPMorgan (JPM) after the crypto bank said that it was evaluating its ability to continue as a going concern and delayed the filing of its annual report on Wednesday.
The crypto-friendly bank said it needed to delay the filing of its annual 10-K for the 2022 fiscal year, and would take an additional two weeks to complete it.
The Wall Street giant also withdrew its price target for the stock, which was $14 a share previously. Silvergate shares fell 47% to $7.18 in premarket trading.
Silvergate’s rating was also downgraded to “Hold” from “Buy” by Canaccord Genuity. The broker also cut its price target on the stock to $9 from $25.
JPMorgan notes that in the recent quarter Silvergate realized a $886 million loss from selling underwater securities, resulting in tangible book value (TBV) being cut more than half to $12.93.
“With the company having sold additional securities (beyond what was guided) as a loss in January/February, this reflects that the company is facing continued liquidity challenges,” JPMorgan analysts led by Steven Alexopoulos wrote.
The fallout from the collapse of FTX has shaken the crypto market, with Silvergate directly impacted as the bank had around $1 billion of deposits from the now defunct exchange at the time of collapse, the report said.
In addition, the past few months has been a back and forth between short sellers and the company, with Silvergate responding publicly on multiple occasions in an attempt to maintain its ecosystem, the report added.
“Short-sellers appear to have contributed to a bank-run of sorts with Silvergate reporting a much greater level of deposit outflows than anticipated in the fourth quarter and this likely continuing so far in 1Q23,” the note said.
