Premarket trading on Thursday saw an almost 50% drop in Silvergate Capital Corp stock (SI) after the cryptocurrency-focused lender announced it would be postponing its annual report. The company is also assessing whether or not it can continue to function.
Silvergate stock selloff
Silvergate stock chart, source: marketwatch.com
A crypto-friendly firm headquartered in California, Silvergate Capital, has decided to postpone filing its annual financial report with the US Securities and Exchange Commission (SEC). The company implied that it would be subject to heightened scrutiny from American authorities and financial regulators.
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On March 1st, Silvergate informed the SEC that it would not be able to file its annual form 10-K. This report provides, among other things, a thorough performance of a firm for the year and audited financial statements. The market reacted very negatively to the news, halving SI’s stock value in just one day.
“We need to perform analysis, record journal entries related to subsequent events, and complete management’s evaluation of internal controls over financial reporting,” the report stated as a reason for the delay.
That is one costly delay. The stock has now officially fallen to a new all-time low. Silvergate also disclosed the sale of further debt instruments during January and February 2023.
It warned that continued losses could have an adverse effect on Silvergate Capital along with its affiliate, Silvergate Bank. The company explained the main problems are the increasing strictness of regulators, the prolonged bear market of 2022, and the bankruptcies of other large industry players.
Even Senator Elizabeth Warren was seeking more information regarding Silvergate’s ties with FTX. If that wasn’t all, Coinbase announced: “it is no longer accepting or initiating payments to or from Silvergate.”
At Coinbase all client funds continue to be safe, accessible & available.
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
— Coinbase (@coinbase) March 2, 2023
The company has been suffering ever since the bear market entered the scene. Its market cap has shrunk to less than half a billion dollars, while it was worth over $7 billion in November 2021. Now it’s questionable whether it has the ability and resources to survive, making it very risky to try to “buy the dip.”