Silvergate Loses Additional Ratings From Moody's
Things at Silvergate Bank seem to be going from bad to worse after receiving a downgrade to its rating from Moody's and having ARK Invest give up part of its shares in the bank. The bank has already been attacked by customers in a run, and its demise has been connected to that of FTX.
Cathy Wood's investment vehicle, ARK Invest, reportedly sold more than 400,000 shares of its parent company, Silvergate Capital, on January 6, for a total value of $4.3 million. After the transaction, ARK Invest was left with just 4,000 shares of the company's stock. This information comes from a number of stories that were published in the media.
During the course of the previous day, the value of those shares saw a decrease that was equivalent to 43 percent.
Moody's Investors Service has also taken action in reaction to the problem at the bank, downgrading its ratings of both Silvergate Capital and the bank as a result of the situation.
Both the long-term deposit rating of the bank and the long-term issuer rating of the bank were downgraded, with a negative outlook for both entities. The long-term deposit rating of the bank was downgraded from Baa2 ("lower-medium grade") to Ba1 ("junk"), and the long-term issuer rating of the bank was also downgraded from Ba2 ("junk") to B1 ("junk").
The key elements that lead Moody's to reach their judgment were the decline in deposits, the losses that were suffered by selling securities to fulfill liquidity needs, and the layoffs that occurred.
As a consequence of liquidating debt in order to return $8.1 billion in withdrawals, Silvergate Bank reportedly sustained a loss of $718 million on January 5th, according to sources. This loss was due to the fact that the bank had to pay back the money.
In addition to that, they terminated the employment of around two hundred workers, which is equivalent to forty percent of their whole workforce.
FTX investors have complained about the same issues in a class-action complaint against Lane, the bank, and Silvergate Capital, which was filed on December 16th.