Silvergate Suspends Dividends to Preserve Liquidity
• Silvergate, a Californian crypto bank has recently suspended dividend payouts in order to preserve its “highly liquid balance sheet”.
• The decision was made due to market volatility and the company’s Q4 2022 losses of $1 billion.
• The firm is still bullish on the crypto sector and is working to maintain a strong capital position.
Silvergate Suspends Dividends To Preserve Balance Sheet
California-based crypto bank Silvergate announced on Jan 27th that it is halting the payment of dividends on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, in order to preserve capital. This decision comes as a result of the crypto winter which has caused many investors to opt for a “risk-off” approach over the past year.
Reasons For Dividend Suspension
The announcement of dividend suspension follows closely after Silvergate posted a hefty $1 billion net loss in its Q4 2022 report on 17th January 2021. CEO Alan Lane attributed this loss to overall sour market sentiment. In addition, he noted that while the firm remains bullish on the crypto sector, they are taking steps to maintain a highly liquid balance sheet with a strong capital position so as to protect against further volatility in future quarters.
Silvergates Cash Position
Despite suspending dividends, Silvergate stated that they still have an adequate cash position in excess of their digital asset customer related deposits which will help them weather any financial storms ahead. Furthermore, their Board of Directors will re-evaluate payment of quarterly dividends depending upon how market conditions evolve over time.
Impact On Investors
The news was met with notable losses in stock prices by investors who were expecting returns from their investments into Silvergate’s preferred stock series A . However , these losses were expected due to recent turbulence within the cryptocurrency industry and could be seen as short term decrease rather than long term damage for investors who remain with Silvergate through this period .
Conclusion
In conclusion , although it may seem like bad news for now , suspending dividend payments may be beneficial for both investors and companies alike due to increased liquidity and protection against potential volatility within the cryptocurrency industry . By maintaining a strong capital position , companies such as Silvergate can weather any potential financial storms ahead whilst providing assurance for their existing shareholders .
