Why are investors feeling jittery about Silvergate Capital (NYSE:SI) today? SI stock fell about 8% this morning as traders considered a press release from Silvergate Capital. Reportedly, the company has suspended dividend payments on its preferred stock shares. This move might raise questions in some people’s minds about Silvergate Capital’s financial health.
Silvergate Capital provides financial infrastructure services for the digital asset industry. It’s a small to midsize company with a market capitalization of around $415 million.
Today, Silvergate Capital disclosed it’s suspending dividend payments on its 5.375% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A. The company claims it’s doing this in order to “preserve capital.”
Moreover, Silvergate said its decision to suspend its preferred-share dividends “reflects the Company’s focus on maintaining a highly liquid balance sheet with a strong capital position as it navigates recent volatility in the digital asset industry.” That sounds ominous, so let’s see how Silvergate Capital’s announcement affects its share price.
What’s Happening With SI Stock?
SI stock declined 5% to 6% this morning, so clearly, the market isn’t pleased with Silvergate Capital’s announcement. Investors may be concerned that suspending the preferred-share dividend is a sign that Silvergate is desperate to shore up its capital position.
This might not be the end of the story, though. Silvergate Capital’s board intends to “re-evaluate the payment of quarterly dividends as market conditions evolve.”
Presumably, when mentioning “market conditions,” Silvergate is referring to the digital-asset market. It’s been a challenging market to navigate, no doubt, due to uncertainty on the macroeconomic level.
So, today’s selloff in SI stock may be justified. On the other hand, bullish-leaning investors could view Silvergate Capital’s move to suspend its preferred-share dividend as prudent.
Going forward, investors will definitely want to monitor the digital-asset market and the various economic factors that affect it. There may be a buying opportunity in SI stock now, though today’s traders apparently aren’t very optimistic.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.