Silvergate Bank Suspends Dividend Payments to Preserve Liquidity

Silvergate, a cryptocurrency bank located in California, has temporarily halted dividend distributions in order to protect its “very liquid balance sheet.”

The company declared on January 27 that it would stop “the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, in order to conserve capital.” This information was provided in a statement made on that day.

The business said that it came to the conclusion that it needed to weather the storm of crypto winter in order to survive, but it emphasised that it still retains a “cash position in excess of its digital asset customer-related deposits.”

As the company navigates the current turbulence in the digital asset business, “This move underlines the Company’s aim on keeping a highly liquid balance sheet with a solid capital position.”

According to another statement made by the company, “The Company’s Board of Directors will re-evaluate the payment of quarterly dividends as market circumstances develop.”

The statement comes only 11 days after the corporation reported a significant net loss of one billion dollars in its quarterly report for the fourth quarter of 2022 on January 17. The negative market attitude as a whole, which has led investors to take a “risk-off” strategy over the course of the last year, was what Silvergate said was to blame for the company’s dismal performance.

Alan Lane, the CEO of Silvegate, noted in the Q4 report that the company is still bullish on the cryptocurrency sector but is working to maintain “a highly liquid balance sheet with a strong capital position.” This language is very similar to the language that was used in the most recent announcement.

Prices of both the company’s preferred (SI-PA) and regular (SI) stocks dropped significantly after the announcement that dividend payments would be halted on Friday.

The price of SI-PA fell by 22.71% to $8.85 by the time the market closed, while the price of SI fell by 3.76% to settle at $13.58. These figures are from data provided by Yahoo Finance.

When looking at the big picture, SI-PA and SI offer a bleak image as well since their share prices have dropped by 60 and 87.46% respectively over the course of the last year.

After announcing on January 5 that it has let off 200 people, which represents 40% of its employment, in an effort to stay afloat, the company has not taken this as the sole step it has done this month to shore up its coffers. Instead, it has also taken this measure.