Citadel Securities Bets On Silvergate, Shares Rise 17%

The market-making firm Citadel Securities, owned by Ken Griffin, has recently made a big bet on the crypto-friendly Silvergate Bank, worth $25 million, according to a filing released by the Securities Exchange Commission (SEC) on February 14. 

According to the SEC file, the market maker hedge fund reported a 5.5% stake in Silvergate for a purchase of $0.01 per share for a total of 1.6 million shares. 

Silvergate’s Shares Get Their Valentine 

Valentine’s day has come for Silvergate, the crypto-friendly bank suffering from the tumultuous events in 2022 after the crypto exchange FTX  debacle that led to a crisis within the financial institution. 

Silvergate’s shares rose 17% following Citadel’s purchase announcement. This represents a healthy recovery in the crypto lender’s stock following FTX’s bankruptcy, one of Silvergate Capital’s clients. 

In addition, Susquehanna Advisors Group took a 7.5% stake in Silvergate. Susquehanna now owns 2.36 million shares of the crypto-lending bank worth $35 million. 

In addition, asset manager BlackRock has disclosed its holdings in the crypto-friendly bank in a filing with the SEC. In January 2023, BlackRock’s purchase of shares in Silvergate represented a 7.2% stake in the company, meaning 2,285 shares owned by Blackrock.

BlackRock, Citadel, and other major institutions have been doubling down on the crypto industry despite the persistent downtrend in the sector. The increase in regulatory pressure has failed to hinder major institutions from jumping into the nascent asset class.

Today’s investment by Citadel in Silvergate hints at the long-term value proposition for crypto and its growing role in global financial markets.

The bank’s shares opened the day in the Nasdaq Index trading at $14.30 per share, and after Citadel’s announcement, it closed the trading day at $17 per share. 

After reporting a decline in the total deposits by investors from $11.9 billion in September 2021 to $3.8 billion in the fourth quarter of 2022, according to the earning call of Chief Executive Officer Alan Lane, today’s announcement could mean a return to normal for the financial institution.

In addition, the crypto lender reported a net loss of $1 billion in the fourth quarter of 2022; after the FTX bankruptcy that caused uncertainty for the investors, the bank reported withdrawals of over $8 billion by the end of 2022.

Furthermore, in Silvergate’s last earnings call, Alan Lane reported a 40% reduction in headcount, or 200 employees, to keep costs under control after the reported cash burn in Q4 2022. 

Despite the recent plunge in the crypto-friendly bank shares, the financial institution and the sector preserve their long-term bullish potential. With falling inflation rates, institutional investors in Bitcoin and other digital assets can grow their interest which can benefit the bank and the crypto market.

Featured Image from Unsplash, chart from Tradingview.