Silvergate Suspends Preferred Stock Dividend to Preserve Capital Amid Volatility
Bullet Points:
• Silvergate Capital (SI) suspended dividend payments on its preferred stock to preserve capital.
• The suspension affects its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, Silvergate said Friday.
• In response, its preferred stock (SI.PRA) is down over 26% on the day at $8.43, while common shares of the La Jolla, California-based bank are down around 6% at $13.26.
Crypto-focused bank Silvergate Capital (SI) has taken a major step to preserve capital in the face of recent volatility in the digital asset industry. On Friday, the La Jolla, California-based bank announced that it had suspended dividend payments on its preferred stock, series A, which carries a 5.375% fixed rate non-cumulative perpetual preferred stock.
In response to the news, the bank’s preferred stock (SI.PRA) is down over 26% at $8.43, while common shares of the bank are down around 6% at $13.26. The decision to suspend dividends is designed to ensure that Silvergate maintains a “highly liquid balance sheet with a strong capital position” as it navigates the current economic landscape.
Silvergate’s decision is especially noteworthy given the recent downturn in the crypto industry. After peaking in late 2017, the combined market capitalization of all digital assets has fallen sharply over the past two years. This has resulted in significant losses for many investors and companies in the industry, leading to a period of increased caution and risk management.
The bank’s move is also indicative of the current state of the banking industry. Banks have traditionally been the main source of capital for businesses and individuals, and the current environment of low interest rates and increased regulation has made it difficult for banks to generate profits. As a result, many banks have taken steps to reduce risk and increase liquidity, such as suspending dividend payments.
Silvergate’s decision is a sign that the crypto industry is still maturing and that companies are taking the necessary steps to protect their balance sheets. It is also a reminder of the importance of risk management in a volatile market, and the need for companies to take a long-term view when it comes to their finances.