Silvergate Bank, a pioneer for crypto and fintech, closes successful IPO

Silvergate Bank, a pioneer for crypto and fintech, closes successful IPO

Occasionally, there are success stories that sound too good to be true, especially when the story involves a “pioneer” that risked treading where all before had feared to even try. In this case, we have Silvergate Bank, a unique financial institution based in San Diego, California, whose executive team consciously decided to serve the underserved crypto and fintech industries. As we previously reported last Friday, the bank launched its Initial Public Offering (IPO) on that day with shares priced at $12.75 to raise $42.5 million on the New York Stock Exchange. It has now successfully closed its IPO.

Shares have ranged from as low as $12.25 to a high of $16.45, but now trade at $16.04, a slight premium over the initial offering of 25.8%. Crypto advocates are celebrating the one bank that demonstrably stepped forward to serve their nascent industry, when the rest of the overly conservative “herd” of financial institutions preferred to look the other way. Where others had cited problems with high risk clients, potential money laundering issues, and possible smears to their precious reputations, Silvergate Bank’s executive team saw opportunity.

We had reported as far back as March of this year that Silvergate Bank was on its way up: “Silvergate Bank. A San Diego based bank that caters to innovative businesses in fintech and the cryptocurrency industry, is not exactly a household name that rings a bell, but in the world of digital assets, it reigns supreme. CNBC has said it is a “key to growth in the digital asset industry”, and the Wall Street Journal has commended the management team for taking “a striking stance in the staid world of banking”. The bank is profitable, raised $114 million in additional capital in early 2018, and controls $1.9 billion in assets.”

A recent prospectus at the time had also disclosed favorable growth metrics in the crypto and fintech space:

By the end of last year, Silvergate revealed that it had 542 cryptocurrency-related customers. This was an increase of 122.1 percent from 2017 when the total number of customers was 244, per the prospectus. Total deposits also increased approximately by 8 percent from $1.46 billion to $1.58 billion. Additionally, Silvergate disclosed that it was also in the process of on-boarding some 232 customers.

Growth of cryptocurrency-related customers has not slowed down at the bank. It reported that as of September 30, 2019, that is was now serving 750 customers from this specific sector, a 38.4% over last year’s ending figure of 542. With such a concentration of crypto clients in one location, the bank was able to leverage these arrangements by creating its own internal payment network, dubbed the “Silvergate Exchange Network” or “SEN”.

The SEN allows for easy fiat payments and transfers between network participants, which include Silvergate clients, as well as investors. Last August, the Gemini crypto exchange, owned by the Winklevoss brothers, joined the network, ostensibly to bring more liquidity to fiat exchange based transfers. The SEN operates “24 hours a day, 7 days a week, 365 days a year”.

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