Following news that the cryptocurrency-focused bank had to sell assets at a significant loss because customers withdrew the majority of their deposits during the fourth quarter, ARK Fintech sold almost all of its shares in Silvergate Capital Corp.
On January 6, the ARK Fintech Innovation exchange-traded fund, managed by Cathie Wood, sold almost 404,000 shares in Silvergate, reducing its holdings by more than 99%. Less than 4,000 shares, worth around $43,000, or less than 0.01% of the fund's total holdings, remain in the portfolio.
According to preliminary fourth-quarter data released by Silvergate yesterday, the company's total client deposits fell from $11.9 billion to $3.8 billion, necessitating the sale of a significant portion of its assets at a loss. and reduced the workforce by 40% (about 200 employees). Its stock price dropped by more than 45% yesterday, below the $12 issue price.
On Thursday, Silvergate shares dropped by a record 43%, and on Friday, they dropped as much as 6.9% further. As the cryptocurrency industry continues to collapse, the price has been declining for more than a year. The stock has lost more than 94% of its value since reaching an all-time high of $222.13 in November 2021, or nearly $5.5 billion in market value.
Wood's decision to almost completely sell her holding is a sharp reversal from just two months ago, when her ARK Fintech Innovation fund bought more than 200,000 shares of the bank in a week as the collapse of Sam Bankman-FTX Fried's exchange increased concerns about the viability of crypto businesses. In mid-December, when the stock was trading at around $19 per share, or roughly 50% higher than Thursday's closing price, she previously sold over 190,000 shares of Silvergate.
Sutton wrote in a client note, "The circumstances surrounding Silvergate are very complex, and the near-term prospects is impossible to forecast." It must contend with the persistence of the crypto winter, regulatory inquiries, and perhaps legislative action, all of which seriously harm the growth trajectory going forward.
