Silvergate Capital stock plunges as Wedbush warns of possible FTX-linked credit exposure

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Silvergate Capital (NYSE:IF) the stock was knocked down by 5% On Wednesday morning, Wedbush analyst David Chiaverini warned of the digital asset-focused bank’s possible credit exposure to struggling cryptocurrency exchange FTX.

Sam Bankman-Fried’s FTX took in the spotlight in recent days after rival Binance said it would offload its FTX token (FTT-USD) holdings, the crypto issued by FTX, in a move that resulted in huge outflows from FTX. FTX’s liquidity crunch has caused enough concern that it agreed to sell to Binance in a non-binding agreement.

After the Binance-FTX news broke, “rumors began to emerge that Silvergate has a line of credit on FTX, which puts them at potential credit exposure risk,” Chiaverini wrote. , which considers SI stocks with an outperformance rating, in a rating. to customers. Silvergate did not immediately respond to Seeking Alpha’s request for comment.

If the rumors are true, exposure to FTX would likely be on the deposit side of Silvergate’s (SI) balance sheet, and “while there may be an increased risk of deposit outflows due to this news, we don’t expect to see no credit losses,” the note read.

The potential Binance-FTX deal itself “presents one of the biggest near-term headwinds for SI, as we believe sentiment surrounding digital assets continues to erode as the economy appears to be heading for a fairly certain recession,” Wells Fargo analyst Jared Shaw wrote in a note.

SA’s Quant system warned investors towards the end of October that SI stock was at high risk of performing poorly due to negative EPS revisions and decelerating momentum. Since that call, SI shares have fallen 57%.

Earlier (October 26), Silvergate Capital moved to Neutral at Goldman after disappointing Q3 results.

Sallie R. Loera