Silvergate Shares Plummet Over 20% Amid Earnings Miss and Stablecoin Delay

Silvergate Shares Plummet Over 20% Amid Earnings Miss and Stablecoin Delay

Silvergate Capital (NYSE:SI) experienced a sharp decline in its shares, falling over 20% following a disappointing earnings report and delays in its highly anticipated stablecoin project. The bank reported a loss per share of $1.28 for the quarter, below the expected $1.41 average analyst estimate.

Earnings and Share Performance

The bank's earnings fell short of expectations, contributing to the significant drop in share price. Despite an increase in digital asset customers to 1,677 as of September 30, average deposits declined to $12 billion from $13.8 billion in the previous quarter. This reflects broader challenges in the crypto market, which has been impacted by a severe downturn, with overall market value dropping over 60%.

Stablecoin Project Delay

A key factor in the share price decline was the delay in the rollout of Silvergate's stablecoin, developed using technology from the Meta Platforms Inc.-backed Diem project. Initially expected by the end of the year, the launch has been postponed indefinitely. CEO Alan Lane expressed confidence in the project's future, emphasizing the bank's position to launch a compliant, safe, and sound tokenized dollar on the blockchain.

Impact of Crypto Market Conditions

The crypto market's downturn, often referred to as a "crypto winter," has significantly affected Silvergate's performance. The Silvergate Exchange Network, a major growth driver, saw a 41% decline in transfers, with $112.6 billion in USD transfers in the third quarter. This reflects reduced activity in the crypto space, impacting the bank's revenue and growth prospects.

Analyst Outlook and Recovery Potential

Analysts at Wedbush cut their EPS estimates for Silvergate due to lower average earning assets growth and the delayed stablecoin launch. However, Silvergate remains well-positioned to benefit from a potential crypto market recovery. The bank anticipates revenue growth once the stablecoin is launched, now expected in 2023.

Overall, Silvergate faces near-term challenges but maintains long-term potential in the digital asset space.