By Sam Boughedda
Silvergate Capital (NYSE:SI) is down more than 8% Friday after it said it had suspended its Series A Preferred Stock dividend.
The move is being made in order to preserve capital, the company said. In addition, Silvergate explained that the decision reflects its focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry.
Silvergate also stated that it continues to maintain a cash position in excess of its digital asset customer-related deposits.
Reacting to the news, Wedbush analysts, who have a Neutral rating and $13 price target on Silvergate shares, said that even though the company is facing an extremely challenging environment, they are still surprised it decided to suspend the Series A Preferred Stock dividend, which has $200 million outstanding, equating to an annual dividend payment of $10.75M.
"While this move could shore up Silvergate's capital position in the near term, we believe this move could raise Silvergate's cost of capital down the road when Silvergate attempts to tap the capital markets for a future capital raise. Any new fixed income or preferred issuance going forward will likely require a higher coupon," the analysts explain.
They also stated that regulatory pressure could have been a factor and that the move could indicate pressure may not yet be subsiding on the company's business.