Cathie Wood Sells 99% of Silvergate Stake as Customers Flee

Cathie Wood Sells 99% of Silvergate Stake as Customers Flee

(Bloomberg) — One of Cathie Wood’s funds sold virtually all of its stake in Silvergate Capital Corp. after the cryptocurrency-focused bank announced it was forced to sell assets at a huge loss after customers withdrew most of their deposits during the fourth quarter.

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Its exchange-traded fund ARK Fintech Innovation offloaded roughly 404,000 shares of Silvergate on Thursday, cutting the ETF’s holdings by more than 99%, according to data compiled by Bloomberg. The fund’s remaining holdings, which amount to less than 4,000 shares, are worth about $43,000 — just about 0.01% of the fund’s total portfolio.

Silvergate told investors on Thursday that customer deposits of the digital asset fell from $11.9 billion to $3.8 billion during the fourth quarter, when fallout from the FTX crash shook investor confidence in the cryptocurrency lender. The exodus forced it to sell securities and related derivatives at a loss of $718 million.

The revelation sent Silvergate shares down a record 43% on Thursday, and they fell as much as 6.9% on Friday. The stock has been on a downward spiral for more than a year amid the debasement of the crypto industry. Since closing at its record high of $222.13 in November 2021, the stock has fallen more than 94%, wiping out about $5.5 billion in market value.

Read more: Crypto Panic at Silvergate creates a new breed of bank

Wood’s decision to exit her position almost entirely is a sharp turnaround from just two months ago, when her fund ARK Fintech Innovation bought more than 200,000 shares of the bank in the space of a week, as the decline of Sam Bankman-Fried’s FTX exchange deepened concerns. about the finance of crypto companies. It previously sold about 190,000 shares of Silvergate in mid-December, when it was trading at about $19 a share, roughly 50% above Thursday’s closing level.

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She is not the only one to be upset at Silvergate after Thursday’s announcement. At least eight analysts cut their price targets on the stock, including Canaccord Genuity’s Joseph Vafi, who cut it from $150 to $25. The cuts brought the cryptobank’s 12-month average target price to $19.45, still about 55% above Thursday’s close.

Steven Alexopoulos of JPMorgan Chase & Co. was one of three analysts followed by Bloomberg to cut their recommendation on the stock, cutting his rating to neutral from overweight. He also cut his price target by more than 50% to $14 from $30. Craig-Hallum’s George Sutton downgraded the stock to hold from buy, while Bank of America Corp analyst Brandon Berman lowered Silvergate to underperformance from neutral.

“The circumstances surrounding Silvergate are very challenging and the near term is difficult to predict,” Sutton wrote in a note to clients. “It must face a continuation of the crypto winter, regulatory investigations and possible legislative actions, which materially challenge the potential growth profile.”

(Updates with BofA downgrade, Friday trading)

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