From an equity point of view a couple of known names that are now on watch are Microstrategy, Coinbase and particularly Robinhood which likely will see 50M shares liquidated at some point (if it hasn’t already happened).
In 2019 the bank had 1B in deposits…it now has about 12B….mostly from digital asset customers.
It’s cash and asset backed (US Treasury Bonds) positions at FMV is 12.8B.
FTX/SBF are featured prominently on Silvergate’s website. So it’s safe to speculate they are customers.
The question then becomes how much exposure does Silvergate have?
5.2B of all deposits on hand are from foreign accounts.
The 10 largest depositors combined have >6B in deposits.
And crypto exchanges are 7B of it’s deposits.
I think it’s safe to say that FTX was likely a large, foreign, crypto exchange with money in Silverbank.
The company also has 1.2B in unfunded but committed loans which would be backed by some combo of real estate/digital assets. Were any of those to FTX or Alameda?
Silvergate is a traditional bank which generates it’s income via interest. They get funds from crypto exchanges, put them into non yielding accounts and then turn around and buy yielding safe assets like government bonds with the funds. How much of those funds are USD denominated, forex denominated or crypto denominated is a question I can’t answer. However the worst case scenario at the moment is USD denominated and the company has matching USD denominated assets.
Obviously losing a potential 10% of your deposits is a huge blow for any bank. As is the risk that any loans which were funded to FTX, Alameda, or any contagion blowups will now be written off. However the stock prior to today’s premarket move was trading at reasonable valuation relative to it’s earnings (10x earnings) and book equity value (slightly under 1x).
When I started to write this I was expecting to find something I thought would be an interesting short given their bitcoin backed MSTR loan. I’m not so sure now. I think if anything this would be the last domino to fall in a rout given what assets they hold against their deposits from crypto customers.
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Silvergate
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Everyone is talking about FTX.
From an equity point of view a couple of known names that are now on watch are Microstrategy, Coinbase and particularly Robinhood which likely will see 50M shares liquidated at some point (if it hasn’t already happened).
In 2019 the bank had 1B in deposits…it now has about 12B….mostly from digital asset customers.
It’s cash and asset backed (US Treasury Bonds) positions at FMV is 12.8B.
FTX/SBF are featured prominently on Silvergate’s website. So it’s safe to speculate they are customers.
The question then becomes how much exposure does Silvergate have?
5.2B of all deposits on hand are from foreign accounts.
The 10 largest depositors combined have >6B in deposits.
And crypto exchanges are 7B of it’s deposits.
I think it’s safe to say that FTX was likely a large, foreign, crypto exchange with money in Silverbank.
The company also has 1.2B in unfunded but committed loans which would be backed by some combo of real estate/digital assets. Were any of those to FTX or Alameda?
Silvergate is a traditional bank which generates it’s income via interest. They get funds from crypto exchanges, put them into non yielding accounts and then turn around and buy yielding safe assets like government bonds with the funds. How much of those funds are USD denominated, forex denominated or crypto denominated is a question I can’t answer. However the worst case scenario at the moment is USD denominated and the company has matching USD denominated assets.
Obviously losing a potential 10% of your deposits is a huge blow for any bank. As is the risk that any loans which were funded to FTX, Alameda, or any contagion blowups will now be written off. However the stock prior to today’s premarket move was trading at reasonable valuation relative to it’s earnings (10x earnings) and book equity value (slightly under 1x).
When I started to write this I was expecting to find something I thought would be an interesting short given their bitcoin backed MSTR loan. I’m not so sure now. I think if anything this would be the last domino to fall in a rout given what assets they hold against their deposits from crypto customers.