While crypto bank Silvergate Capital has been going through a rather difficult phase for the past two months, financial giant BlackRock has decided to increase its stake in the company. According to the latest filing with the US Securities and Exchange Commission (SEC) on Tuesday, January 31, BlackRock has increased its stake in the Silvergate crypto bank to 7.2%.
BlackRock’s stake in Silvergate Capital
Previously, BlackRock’s stake in Silvergate was 5.9%. This massive increase in its stake at such a time reinforces investor confidence in the bank. Shares of Silvergate Capital jumped 9.96 percent Tuesday, closing the trading session at $14.42.
According to FactSet data, more than 70% of freely available Silvergate Capital shares are sold short. That’s a huge relief rally for investors in the crypto bank Silvergate.
This crypto-currency and blockchain bank has been in deep trouble since the FTX crypto-currency exchange fell in November 2022. Silvergate Bank’s association with FTX in the past has led to severe skepticism among its customers and investors.
In such a scenario, BlackRock’s support is a major asset for Silvergate Bank, which could help it weather the current difficult market conditions.
Silvergate Bank’s Key Challenges
As we’ve said, since the FTX blowout, Silvergate Bank has been facing major challenges. Over the past two months, Silvergate Bank’s (NASDAQ:SI) share price has experienced a massive decline. Even though the broader market recovered in January 2023, SI stock has continued to decline.
Amid the FTX implosion, Silvergate Bank reported a net loss of $1 billion in the final quarter of 2022. So far in 2023, Silvergate Bank’s stock price has fallen 20%. SI stock has already plummeted more than 87% in the past year.
During the fourth quarter, Silvergate Bank suffered massive withdrawals due to its alleged relationship with the FTX exchange. The bank also took steps to maintain liquidity, including selling debt and using wholesale funding. Silvergate CEO Alan Lane said the bank would remain true to its mission of serving its core institutional clients.
Amid a difficult macroeconomic environment and significant withdrawals, Silvergate Bank was forced to make layoffs last month.