Silvergate Shares Crash More Than 20% on Earnings Miss, Stablecoin Launch Delay

Silvergate Capital, the holding company behind Silvergate Bank, announced its stablecoin plans have been delayed which, alongside a disappointing earnings report, plunged the stock more than 20% on Tuesday. 

Silvergate reported quarterly earnings of $1.28 per share for the third quarter of 2022, missing analyst estimates of $1.45. 

The bank did see an increase in digital asset customers, Silvergate Capital noted in its latest earnings report, but its payment system, the Silvergate Exchange Network (SEN), saw a 41% decrease in US dollar transfers during the quarter.  

The bank will also be delaying plans to launch its own stablecoin, Silvergate CEO Alan Lane noted on the company’s earnings call Tuesday. 

Silvergate purchased the technology assets of Diem, Meta’s now-abandoned stablecoin project, in January 2022 for $182 million and announced its own plans to create an in-house token. Silvergate said it would integrate Diem assets into SEN, a process the bank expected would cost $30 million.

During Silvergate’s first quarter earnings call in 2022, Lane said stablecoins can be a “meaningful payment rail for consumers and businesses around the globe.” 

On Tuesday, though, Lane clarified that the project will not be launching by the end of the year, though not because there is anything wrong with the technology. He noted that the company is working closely with regulators to ensure the product is up to the appropriate standards when launched. 

Silvergate has said that it plans to back its token with USD, but additional details about reserves have not yet been revealed. The delay comes as regulators around the world start to take a closer look at stablecoins. Lawmakers in the US particularly have expressed interest in establishing audit rules around stablecoin reserves.  

Silvergate was trading at $55.32 per share toward the close of the trading session Tuesday. The stock is down more than 60% year to date, but still up over 300% since its initial public offering in 2019. 

Executives’ optimism around the industry as a whole remains, Lane noted, specifically with regard to recent announcements from traditional financial companies expressing greater interest in cryptocurrencies. “But these things take time to play out,” Lane said.

“There is a lot of institutional adoption that is still coming — none of these things are live yet, they’ve all been an announcement about things to come — so we could not be more optimistic on the long-term trajectory,” he said.

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