Silvergate Downgraded By JP Morgan, Stock Price Dropped Seriously

Key Points:

• JP Morgan removed its price target and downgraded its rating on Silvergate’s shares from “Neutral” to “Underweight,” indicating that the bank still has liquidity issues.
• The shares of Silvergate fell over 45% in US premarket trade on Thursday.
• In addition, Coinbase stated that it had little exposure to Silvergate and that it had left the crypto-focused bank out of prudence.

JPMorgan downgraded Silvergate Capital’s rating from “Neutral” to “Underweight” after the cryptocurrency bank said that it was assessing its capacity to continue as a going concern and postponed the submission of its annual report on Wednesday.

As the company disclosed in a filing with the U.S. Securities and Exchange Commission (SEC) late Wednesday that it would not be able to complete its annual 10-K report in time, shares of Silvergate fell over 45% in US premarket trade on Thursday.

In view of the present commercial and regulatory issues it is facing, Silvergate said it is assessing its ability to continue as a going concern and is in the process of re-evaluating its companies and strategies.

Silvergate announced that it would not be able to submit its annual report by the new deadline of March 16. In a statement with the Securities and Exchange Commission, the company also stated that it has sold additional debt instruments to pay off debts this year and that any losses might cause the bank to be less than well-capitalized.

For the bank, whose shares had already fallen 90% over the previous year due to tumbling cryptocurrency values, regulatory scrutiny, and a succession of bankruptcies throughout the digital asset sector, this is an existential catastrophe.

According to JPMorgan, Silvergate suffered an $886 million loss from selling underwater securities in the most recent quarter, which reduced the company’s tangible book value (TBV) by more than half to $12.93.

Analysts at JP Morgan stated in a research note:

“We now see elevated risk of further downside in SI shares given the outstanding risk that the bank is unable to remain a going concern.”

As Coincu reported, out of concern about Silvergate’s current problems, crypto exchange Coinbase is no longer using Silvergate to facilitate dollar payments for its prime customers.

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Harold

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