Silvergate Stock Plunges 31% as Crypto Bank Delays SEC Financial Report

Silvergate Capital Corporation, the parent company of Silvergate Bank, delayed its annual 10-K report filing with the U.S. Securities and Exchange Commission on Wednesday, telling the agency it “needs additional time” to allow an independent accounting firm to complete certain audit procedures.

In the filing, Silvergate also cited “a number of circumstances” that will “negatively impact” the timing of the 10-K report.

These include the sale of additional investment securities “beyond what was previously anticipated and disclosed in the company’s earnings release,” as well as the sale of additional debt securities in January and February 2023, from which Silvergate “expects to record further losses.”

According to Silvergate, “these additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank […] and could result in the Company and the Bank being less than well-capitalized.”

Silvergate’s stock (SI) was trading at $13.53 at the closing bell Wednesday, but plunged as much as 31.7% on the tail of the news in after-hours trading, dipping well below $10.

Silvergate to reevaluate strategy

Silvergate reported a $1 billion net loss as well as a decline in customer deposits of roughly $14 billion in the last quarter of 2022, citing the “planned reduction in digital asset banking deposits” alongside industry-wide chaos.

The bank’s deposits were rocked in the aftermath of the FTX collapse, prompting it to tap the Federal Home Loan Bank (FHLB) for a $4.3 billion loan in January and sold roughly $5.2 billion in debt securities, according to the company’s filings.

Silvergate, which was hit with a class action lawsuit alleging it directly aided FTX’s fraudulent activities in December, is also one of the most shorted stocks on Wall Street, with as much as 71% of all shares in the company that are available for investors to buy and sell being short positions, according to MarketWatch.

In its Wednesday filing with the SEC, Silvergate also said it is “currently analyzing certain regulatory and other inquiries and investigations that are pending with respect to the Company.”

Silvergate added that it’s now “in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”