Short-sellers rake in $780 million betting against Silvergate as the crypto-friendly bank closes its doors
- Short-sellers have made $780 million betting Silvergate since the bank's shares peaked in November, per S3.
- The shares have tanked over 96% in 12 months, in the crypto rout and the fallout from FTX's collapse.
Short-sellers have raked in millions of dollars in from the mounting troubles at embattled crypto-friendly bank Silvergate, which has just said it plans to close down.
Investors betting against Silvergate have made about $780 million in mark-to-market profits since November 2021, when its stock peaked, Bloomberg reported Wednesday, citing S3 Partners data. Over the week to then alone, as the crypto bank's struggles became clearer, winning bets against the company pulled in $190 million.
Silvergate said Thursday it will close down, after flagging last week that it could be forced to shutter, thanks to mounting problems such as a pending US Department of Justice investigation into its operations.
The once go-to bank for the crypto industry was hit hard by the digital-asset rout and the fallout of Sam Bankman-Fried-founded FTX's collapse.
Shares in Silvergate Capital, the bank's holding company, have plunged over 96% in the past 12 months, as more than a dozen crypto firms it has done business with have shut down, been fined, or come under investigation.
The stock was down 46% at $2.65 in premarket trading Thursday, having peaked at over $200 during the height of the crypto boom in 2021.
Shorting stock typically involves borrowing shares and immediately selling them, with the goal of later buying them back when they fall in price.
Only about 15% of shares in Silvergate are not sold short, according to S3. That means it's hard for potential short-sellers to bump up their bets. "The well has run dry," S3's Ihor Dusaniwsky told Bloomberg.
Investors have also been using put options to bet against Silvergate. George Soros' family office disclosed its fund held put options on 100,000 Silvergate shares at the end of December.
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