Signature Bank’s Stock Drops by 9% as Silvergate Prepares to Close Down
On Thursday, Signature Bank’s stock fell after its major competitor Silvergate announced it was planning to halt operations. The stock dropped by about 9% to $92.41 per share, its lowest price in more than two years. Meanwhile, Silvergate stock plunged 20% to $3.87.
The holding company for Silvegate Bank, Silvergate Capital Corporation, stated in an announcement that it would voluntarily liquidate due to the current regulatory developments and ongoing crypto winter.
The bank has promised to repay bank deposits to clients in full. The crypto-friendly bank’s announcement comes a few days after it suspended its Silvergate Exchange Network, a platform that facilitated crypto transactions for its customers.
Crypto Companies Cut Ties With Silvergate
Over the past week, several crypto companies have ended their association with Silvergate. They include stablecoin issuers Paxos and Circle and exchanges Bitstamp, Gemini, crypto.com, and Coinbase.
In addition, Investment company Galaxy announced it would no longer accept or initiate transfers to Silvergate. Elsewhere, the largest Bitcoin corporate holder MicroStrategy, took to Twitter to express fears about their possible exposure to the closure of the bank. Last March, Silvegate granted MicroStrategy a $200 million loan.
The price of Silvergate’s stock has sharply declined since last week when the bank failed to file its yearly financial report with the US Securities and Exchange Commission, signaling it suffered more losses during its 2022 fourth quarter than previously disclosed.
Could Signature Bank Benefit From Silvergate’s Troubles?
Although Silvergate’s troubles could cause more crypto firms to tap Signature as their bank partner, yesterday’s declines signal investors are skeptical about banks largely exposed to the crypto industry.
In February, Signature was slapped with a lawsuit over its association with now-bankrupt crypto exchange FTX, which accused the crypto-friendly bank of having actual knowledge of and facilitating the exchange’s fraud.
In late 2022, Signature announced plans to minimize its exposure to crypto by reducing bank deposits for companies involved with that asset class. On Wednesday, the bank’s President Eric Howell reaffirmed the plans, saying crypto firms can only make USD deposits. In addition, Howell stated that the bank would further limit these deposits in the coming months.
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