Silvergate has suspended its dividends due to financial constraints. It claims it is taking that step to preserve a highly liquid balance sheet following a significant loss in Q4 2022.
$1B loss drives Silvergate to desperate measures
It has been a hard time for SIlvergate as it struggles to stay afloat following a $1B loss in Q4 2022. It won’t pay its investors dividends in 2023 as the economic conditions worsen.
This is not the first harsh measure the bank has taken; lately, it even laid off 200 employees to cut its expenses. The California-based bank announced on Friday that it was halting its dividends pegged at 5.375% Fixed Rate Non-Cummulative Perpetual Stock, Series A, to preserve capital.
It outlined that the decision comes amid the continuation of a strong crypto winter but did express that investors shouldn’t be worried about the reserves. It said it has at least a 1:1 match of reserves and customer deposits.
“This decision reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry.”
The firm added that its Board of Directors would re-evaluate the payment of quarterly dividends as the market conditions evolve. This news had a harsh effect on the company’s stock prices, with SI-PA dropping by 22.71% to $8.85 and the common SI stock price plummeting by 3.765 to $13.58.
Zooming out, the two stocks have been declining in value over the past 12 months, with SI-PA dropping by 60% and SI stocks by 87.46%.
A looming economic collapse?
Silvergate isn’t the only company affected by the ongoing financial crisis. Post COVID-19 economy was expected to be harsh and weigh down on the average investors and people. Things have worsened, with multiple companies having massive layoffs, filing for bankruptcy, and others going into debt.
Countries are also battling record-high inflation rates and recession threats. Earlier in the week, the US hit its debt ceiling and still has an inflation rate of 6.5%. Although it has managed to battle it from 10%+, the hitting of the debt ceiling means a hard time ahead for the citizens. On the other hand, the UK is expected to undergo a ‘soft recession’ in 2023.
The financial decline is cutting across the globe, with China being in a better position as it only has a 1% inflation to battle with. Citizens from other countries should brace for more challenging economic times as the markets may shrink.