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2019 will be remembered for a string of disastrous IPOs like Uber, Lyft, and Peloton. But one crypto company has managed to make history this year: Silvergate is now up 28% from its IPO price.
As we are coming to the year’s end we somehow always tend to look in the past to reconcile what was good and what wasn’t. Speaking of the IPOs, we can surely say this year was marked by numerous IPO failures with more than half of stock market debuts now trading below their initial offering.
We can just mention hail-raiding companies as are Uber and Lyft who were probably the biggest losers of the year. However, there were also plenty of unicorns that got smashed in 2019 including Peloton (the third-worst debut of the last decade) and Slack (trading at almost half its IPO price).
And of course, let’s not forget WeWork. The company filed its public-offering paperwork in August. Then, in only one month, the co-working company cut its valuation down from $47 billion to a pathetic $10 billion. Then it removed Adam Neumann as CEO, and delayed its initial public offering indefinitely. But that’s not the end. In October, WeWork was taken over by its biggest investor, Softbank who gave Neumann a $1.7 billion golden parachute to step down from his position as chairman of the board at WeWork. Softbank assigned WeWork a $5 billion valuation at the end of the third quarter. On November 21, WeWork confirmed that it laid off 2,400 employees.
So, launching an IPO in 2019 was a pretty insecure thing to do. However, there were few winners among which is, well hello there, one cryptocurrency company – Silvergate.
Silvergate debuted in November and is since then it grew more than 28% from its IPO price. The stock closed on Tuesday a bit lower though – 3.62% to $15.44. However, if you consider the fact that in the very same period the crypto market plunged pretty much down – this is a big thing to achieve. But, there is a legit question of how did this stock made it?
Silvergate is a banking service focused mainly on the cryptocurrency sector. At the time of filing its IPO documents, it got 542 cryptocurrency-related clients that represents a 122% year-on-year increase. The bank was also in the process of getting another 232 clients.
That makes Silvergate the banking construction for the digital asset economy. It provides the most important service to cryptocurrency companies that have, until recently, been refusing to bank at traditional institutions.
Its clients include some of the leading cryptocurrency exchanges such as Gemini and Circle as well as investment companies like Polychain Capital.
What it actually means is that NYSE-listed Silvergate can be monitored as the heart of the crypto economy. With approximately $1.2 billion in deposits, the company aims at the total market it believes may be worth “approximately $30 to $40 billion” in dollar deposits.
Silvergate stock has beaten the whole cryptocurrency market as well. In the month since the company’s IPO, its stock has jumped 28% while Bitcoin has dipped 20%.
One of the reasons for this success may have come from Silvergate’s largest clients – exchanges. With its help, crypto exchanges earn money even in a bear market in a more traditional way – through trading commissions and fees.
But this is not all. Silvergate also outperformed cryptocurrency mining stocks such as Canaan for example that has also dropped below its IPO price while Silvergate rockets.
However, even though Silvergate may have succeeded with its IPO and stock growth, this is still considered a risky investment to make.
CMS Holding’s Dan Matuszewski explained how Silvergate could theoretically bring down the whole market.
“If there’s one single existential risk to crypto beyond any tech reason right now it’s Signature and Silvergate Bank. And probably Silvergate because they’re the biggest one banking all these guys. Like if Silvergate shuttered tomorrow for God knows what reason that would be a huge problem for crypto. People don’t realise how much money’s flowing through that thing and how many assets are effectively custodied by the desks that are sitting there. It would be real, real ripple effect.”
Still, we will stay proud of Silvergate, a rare high-performer in both sectors – the traditional and the cryptocurrency one.