Silvergate has put a stop to the payment of dividends as it is faced with a highly liquid balance sheet.
According to the crypto-based bank, this suspension affected its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, and in effect, its preferred stock went down by about 26%. Silvergate also mentioned that it is still maintaining a “cash position in excess of its digital asset customer-related deposits.”
“This decision reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry,” the announcement made by the California-based crypto bank clearly stated, “The Company’s Board of Directors will re-evaluate the payment of quarterly dividends as market conditions evolve.”
Silvergate Faces Opposition Because of FTX
Silvergate took this huge decision as a means of overcoming the crypto winter which has been plaguing the crypto industry since last year. The company needs to weather the storm if it wants to survive the market troubles. Already, Silvergate has had it rough before this year even started. Just a few days ago, it reported a $1 billion net loss in its Q4 2022 earnings.
Notably, Silvergate blamed its poor performance on the overall downtrend of the market which ended up leading many investors to choose a ‘risk off’ approach. Silvergate is still suffering from its contagion to bankrupt Bahamian-headquartered cryptocurrency exchange FTX. At first, its shares fell as a result of rumors claiming that Silvergate was involved with FTX.
FalconX, a crypto prime brokerage firm that was previously in business with Silvergate also severed ties with the crypto-inclined financial institution.
“Out of an abundance of caution for our customers, we will not be using Silvergate SEN and wires, effective immediately and until further notice. This action is based on publicly available information on Silvergate and is consistent with other market players,” FalconX announced.
At that time, Alan Lane, Chief Executive Officer (CEO) of Silvergate, claimed that the firm was absolutely liquid and had enough capital to scale through the volatile market.
“We still have an active performing SEN leverage book where we’re lending against bitcoin,” adding also “whether deposits are up or down, we have the liquidity and the capital ratios to support the volatility.”