Coinbase drops Silvergate after they delay annual SEC filing, SI stock plunges 50%
(Kitco News) - Silvergate Capital Corporation (SCC), which owns Silvergate Bank, one of the leading banking service providers to the embattled crypto sector, told the U.S. Securities and Exchange Commission (SEC) late Wednesday afternoon that it would be unable to file its 2022 annual financial report before the extended March 16 deadline, causing its share price to collapse and raising fears of another major contagion event for the cryptocurrency industry.
In a ‘Notification of Late Filing’ submitted to the SEC, the company laid out the reasons for the delay, writing that their financial situation has deteriorated beyond the $948.7 million in losses for 2022 which they revealed in their January 17 preliminary report. These new developments included “the sale of additional investment securities” in January and February, “primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco” which will result in “other-than-temporary impairment on the securities portfolio.”
Silvergate wrote that the additional losses will “negatively impact the regulatory capital ratios” of the parent company and their wholly owned subsidiary, Silvergate Bank “and could result in the Company and the Bank being less than well-capitalized.”
“In addition, the Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements,” they wrote. “The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”
The delay, combined with the new disclosures and pessimistic outlook contained in the report, sent Silvergate’s (NYSE-SI) stock price into a tailspin on Wednesday evening, with shares falling over 30% below the closing price of $13.54 in after hours trading.
The stock hit a low of $6.87 shortly after the Thursday open, representing a nearly 50% loss in value, before recovering somewhat, and is currently at $7.52 at the time of writing, down 44% on the day.
Reaction from Silvergate’s partners and the broader financial community came swiftly on Thursday, beginning with U.S. exchange Coinbase.
At Coinbase all client funds continue to be safe, accessible & available.— Coinbase (@coinbase) March 2, 2023
In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.
Coinbase also said that they would handle institutional client cash transactions through their “other banking partners” and are taking action to ensure their customers are not impacted by the change. “Coinbase has de minimis corporate exposure to Silvergate,” they added.
In a separate email sent to clients, the exchange named the key banking partner which would replace Silvergate. “Coinbase Prime has elected to make changes to our USD banking partners," they wrote. "We are facilitating fiat withdrawals and deposits using Signature Bank, effective immediately."
Adam Cochran of Cinneamhain Ventures tweeted that the Coinbase move could spell the end for Silvergate.
There it is.— Adam Cochran (adamscochran.eth) (@adamscochran) March 2, 2023
One of the biggest remaining holdouts supporting Silvergate shifting to Signature Bank.
Explains the pre-market dive.
I think market is giving up on trying to save SI and willing to anoint Signature as the main crypto US bank for now. https://t.co/Oif2w8TEv3