Silvergate Capital Stock Price: Get out of SI while you still can

Silvergate Capital (SI) capitulated on Thursday after the crypto bank announced late Wednesday that it would not be filing its annual report or 10-K for last year by the extension deadline on March 16. This news led Morgan Stanley to downgrade the stock, and Coinbase Global (COIN) said it had halted all payments to and from Silvergate Capital.

Silvergate Capital stock lost 57.7% on Thursday and has sold off another 3.7% in Friday's premarket to $5.51.

Silvergate Capital stock news: Worries over status as a going concern

Failing to file annual and other reports on time with the Securities & Exchange Commission (SEC) is typically something that happens to companies on the verge of bankruptcy. It is widely known that Silvergate was injured by the sudden collapse of Sam Bankman-Fried's FTX crypto exchange, but opinions differ on the extent of the damage.

Silvergate has told clients that paying down $4.3 billion in short-term debt to the Federal Home Loan Bank of San Francisco has impacted its liquidity and stated that it needs more time to evaluate the health of its buisness. Most ominously, a recent filing with the SEC says executives and an independent auditor are reviewing whether Silvergate can remain in business. Coinbase ending its corporate relationship with the bank seems worrisome as it remains the lead crypto exchange in the United States. Also Coinbase's status in the industry lends credence to the belief that Coinbase may have better information than Wall Street on the matter.

In its filing late Wednesday, Silvergate management wrote: "Subsequent to December 31, 2022, a number of circumstances have occurred which will negatively impact the timing and the unaudited results previously reported in the Earnings Release, including the sale of additional investment securities beyond what was previously anticipated and disclosed in the Earnings Release primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco. The Company sold additional debt securities in January and February 2023 and expects to record further losses related to the other-than-temporary impairment on the securities portfolio. These additional losses will negatively impact the regulatory capital ratios of the Company and the Company's wholly owned subsidiary, Silvergate Bank (the "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."

JPMorgan's Steven Alexopoulos downgraded Silvergate from Neutral to Underperform on the news. Both JPMorgan and Canaccord said the liquidity issue made Silvergate a much less attractive investment. Silvergate had $949 million in net income losses in 2022 after producing $76 million in profits for 2021. Major customer withdrawals following the FTX debacle reduced Silvergate's fee revenue in the fourth quarter.

Silvergate stock forecast

$5.51 is a long distance from Silvergate Capital stock's all-time high in November 2021 of $202.59. My, how times have changed. SI stock is now more than 97% off those highs. The "going concern" talk should keep any potential knife catchers away from Silvergate. If, however, you want to take your chances, instead just look at the daily chart below. On Thursday Silvergate shares plunged through the S2 daily pivot level of $6.40. The reason you cannot see the S3 pivot below is that it is at $-0.87. That's right. The support given by the pivot points is literally less than zero. This is not a stock to own. The chart is clear.

SI daily chart