Silvergate Announces Closing of Public Offering of Class A Common Stock – Silvergate (2024)

FAQs

What does closing of public offering of common stock mean? ›

Public Offering Closing means the date on which the sale and purchase of the shares of Common Stock sold in the Public Offering is consummated (exclusive of the shares included in the Underwriter Option).

LA JOLLA, Calif. –(BUSINESS WIRE)– Silvergate Capital Corporation (NYSE: SI) (“Silvergate” or the “Company”) announced today the launch of an underwritten public offering of $400 million of shares of Class A common stock.

Going public—an initial public offering of stock—can be an effective means of raising cash for corporate ventures. But before undertaking the complex, expensive, time-consuming preparations and incurring the risks involved, the upside and downside of this move must be fully assessed.

Since that time, Silvergate has completed its liquidation and wind-down plan, has paid back all deposits to its customers, and no longer functions as a bank.

When an IPO closes, the company stops accepting bids from investors. The allotment process begins, shares are credited to investors' demat accounts, and excess amounts are refunded. The company then lists its shares for public trading.

The company completes the offering at an attractive price and the shares are quickly absorbed by the market. In fishing terms, the market “inhales” the new shares. And the stock's trend continues, more or less as it had been prior to the secondary offering.

In a press release, the bank's holding company, Silvergate Capital Corporation, said it made the decision to shut down “in light of recent industry and regulatory developments.” It's been clear for a while that the company was struggling along with some of its most high-profile clients like FTX and Genesis.

Silvergate, which primarily served clients in the cryptocurrency industry, announced in March 2023 that it would wind down operations and voluntarily liquidate after suffering significant losses in the wake of FTX's collapse and a broader downturn in digital assets.

Silvergate looks like it's on the brink. Chiaverin and Violino rate the bank at Underperform, as have most other Wall Street analysts who haven't withdrawn coverage of the company altogether. This is a risky name for investors to touch.

A public offering is the sale of equity shares or other financial instruments such as bonds to the public in order to raise capital. The capital raised may be intended to cover operational shortfalls, fund business expansion, or make strategic investments.

Can you make money on common stock? ›

Over the long term, this type of equity can offer attractive returns. But remember, this comes with a catch: if a company has to liquidate its assets, common stockholders are at the back of the line, getting paid only after bondholders, preferred shareholders, and other creditors have gotten their share.

Disadvantages of issuing common stock:

Market risk arises for common stockholders when the company consistently underperforms. A significant decline in an organization's performance undermines its profits and, eventually, the shareholder's earnings and dividends.

There's Little Hope for a Recovery With SI Stock

The collapse of Silvergate Capital has been spectacular, with the company's share price plummeting from over $200 to less than $2 in a year and a half. It's hard to even define what a “recovery” would mean at this point.

The key trigger for stress at SVB and Silvergate was large valuation losses on their unhedged holdings of long-term fixed-rate debt securities (e.g. government and mortgage-backed bonds) as interest rates increased.

Some of the services provided by Silvergate will migrate to other banks such as Signature Bank, Provident Bancorp, Metropolitan Commercial Bank and Customers Bancorp, the report said.

Closing of the Offering means the first purchase of shares of Common Stock by the Underwriters from the Stockholder pursuant to the Underwriting Agreement to be entered into in connection with the Offering.

Common stock tends to outperform preferred shares and offers the greater potential for long-term growth. If a company does well, the value of a common stock can go up. But keep in mind, if the company does poorly, the stock's value normally goes down.

Oftentimes newly IPO'd stock “pops” on the first day of trading. In fact, the average first day return from the IPO price has been ~19% historically. That doesn't mean all IPOs go up, there's a wide range of potential outcomes, but on average, IPOs are underpriced relative to where they end their first trading day.

Shelf offerings are particularly beneficial when a company anticipates a need for capital but is uncertain about the timing. They also provide a competitive advantage by allowing companies to act swiftly when market conditions are favorable for fundraising.