The biggest asset manager in the world, BlackRock, revealed a sizable investment in Silvergate Capital, the industry’s battered banker whose share price has been a high-profile victim of the crypto crash. Bullish sentiment isn’t limited to BlackRock.
BlackRock (BLK) revealed a 7.2% holding in Silvergate (SI), or 2,285 shares, in a filing with the Securities and Exchange Commission on Tuesday. With a current 5.6% ownership holding through its BlackRock Fund Advisors division, BlackRock becomes one of the bank’s top shareholders.
Silvergate stock increased by 8% on Tuesday to close at $14.19 and by as much as 5% on Wednesday before shares of the company started to retrace their gains as the Dow Jones Industrial Average and S&P 500 started to decline.
Silvergate, which Wall Street previously hailed as one of the finest regulated methods to play the once-booming cryptocurrency market, has been badly hit by the crash in digital assets, with the shares down 86% over the past year — falling far more than even Bitcoin.
Silvergate, a federally insured bank, established itself as a significant service provider to cryptocurrency exchanges and investors, and its shares benefited greatly from the 2020 Bitcoin bull run. However, the decline in token values since the end of 2021 and a series of high-profile bankruptcies — including one of its key clients, FTX, amid fraud allegations — have caused the bank to experience a lot of problems.
Large portions of Silvergate’s workforce have been let go, and the company has suspended dividend payments in an effort to reduce expenses after posting a staggering $1 billion loss in the fourth quarter due to losses on asset sales that were necessary to maintain liquidity. For the group’s investors, the bad news kept coming in.
Even if the shares have not yet recovered, the company has lost more than 10% of its value thus far in 2023, strengthening the case that Silvergate may be a good investment if the bank successfully turns things around. It would undoubtedly be beneficial if the cryptocurrency markets recovered, regulatory transparency increased, and institutional investors started to embrace Bitcoin and other digital assets.
Although analysts surveyed by FactSet only give Silvergate stock an average recommendation of Hold, the average price target still predicts gains of about 20% from present levels. BlackRock also purchased the large dip.
There are others besides the asset manager. Bill Miller, a well-known value investor, recently disclosed to Barron’s that he had increased his holdings in Silvergate, which he pointed out were trading at $155 just over a year ago.
While that price level is currently outside the reach of Silvergate stockholders, if the worst is nearing an end for the company, then a price level higher than the low teens may soon be in view.