According to the most recent FINRA data, more than 72% of Silvergate Capital Corp stocks were shorted as of January 31.
According to the most recent Short Interest Reporting from February 9, crypto bank Silvergate Capital Corp. is the second most-shorted stock in the United States, with more than 72.5% of its shares shorted.
The Financial Industry Regulatory Authority (FINRA) collects and publishes short interest positions for all equity securities twice a month. A short position indicates that investors and traders believe the price of a security, such as a stock, will fall in value. A short seller profited from a security’s price decline.
Silvergate stock (SI) is currently down more than 87% in the last year. Silvergate’s bearish sentiment stems from its recent earnings report and legal battles with bankrupt firms FTX and Alameda Research.
On January 17, the bank announced a $1 billion net loss attributable to common shareholders in the fourth quarter of 2022. According to a report from the United States Securities and Exchange Commission (SEC), Silvergate experienced significant outflows of deposits during the period, forcing the company to seek wholesale funding and sell debt securities to maintain liquidity.
Silvergate reportedly borrowed $3.6 billion from the Federal Home Loan Banks System in order to mitigate the effects of a surge in withdrawals following the collapse of crypto exchange FTX in November 2022.
The bank is being investigated and sued in the United States for allegedly assisting FTX in fraudulent activities such as lending and commingling user funds. The company has been accused of “furthering FTX’s investment fraud,” while shareholders claim Silvergate violated the 1934 Securities Exchange Act. A Justice Department investigation into the bank’s involvement in FTX transactions is currently underway.
According to Silvergate, Alameda opened an account with the bank in 2018, prior to the launch of FTX. The company claims to have conducted due diligence at the time and to have been monitoring the situation on an ongoing basis.
Moody’s Investors Service recently reacted to the bank situation by downgrading Silvergate Capital and its bank to “junk,” with a negative outlook for both organizations.