Why Silvergate Stock Looks Tarnished Today
Shares of Silvergate Capital (NYSE: SI) took on a dark patina on Monday. The crypto-friendly bank's stock was down by 7.5% as of 10:20 a.m. ET after a well-respected analyst firm downgraded Silvergate to the equivalent of a sell rating.
In a Monday letter to investors, Morgan Stanley analyst Manan Gosalia lowered Silvergate's recommendation grade from equal weight to underweight, citing stress to the financial ecosystem around the crypto industry after November's FTX meltdown. As the only bank in Morgan Stanley's portfolio with an intentional focus on crypto, Silvergate is exposed to massive financial pressure in the aftermath of the FTX exchange's collapse and may become a target for litigation. Therefore, Gosalia argues that Silvergate investors should reduce their exposure to this stock until the crypto sector's elevated uncertainty has subsided.
I agree that the crypto market is subject to incredibly high levels of uncertainty and volatility right now. At the same time, Silvergate strikes me as one of the safest crypto bets amid the turmoil. The bank has been around since 1988, building a robust financial platform and decades of regulatory experience. Silvergate's Tier 1 leverage ratio -- an industry-specific metric that measures a bank's ability to withstand financial stress -- was 10.7% in the third quarter. That lands Silvergate among the top 15% of American banks by this vital metric.
Source Fool.com
