Silvergate Capital Corporation, a California-based crypto bank, has suspended dividend payouts to preserve its “highly liquid balance sheet”, according to a company statement on January 27th. The firm has halted “the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, in order to preserve capital.”
The bank reported a net loss of $1 billion in its Q4 2022 report on January 17th. The poor performance was attributed to the overall sour market sentiment, which has seen investors opt for a “risk-off” approach over the past year. However, the bank emphasized that it still maintains a “cash position in excess of its digital asset customer-related deposits.”
The bank's CEO, Alan Lane, used similar language to the latest announcement, noting that the company is still bullish on the crypto sector but is working to maintain “a highly liquid balance sheet with a strong capital position.”
The news of suspended dividends was met with notable losses in both its preferred (SI-PA) and common (SI) stock prices. According to data from Yahoo Finance, the price of SI-PA dropped by 22.71% to $8.85, while SI declined by 3.76% to sit at $13.58 by market close.
This is not the only action the firm has taken to shore up its coffers this month, after it announced on January 5th that it had laid off 200 employees — representing 40% of its headcount — in a bid to keep afloat.
The company’s Board of Directors will re-evaluate the payment of quarterly dividends as market conditions evolve,” the firm added.
This move is a precautionary measure taken by the company to ensure that it has enough cash on hand to weather any potential economic challenges or market downturns. It's worth noting that companies often suspend dividends during times of economic uncertainty to conserve cash and support their balance sheets.
Source: cointelegraph.com