Silvergate Capital (NYSE:SI) may not be a very familiar name, especially for those who aren't that focused on certain markets. For those who do focus on the cryptocurrency market, however, Silvergate might be a lot more familiar. In fact, there's a lot going on under the hood at the digital currency exchange operator, and just those four words should have you paying a lot closer attention to what's going on with this one.
New Stock, New Lending
Just a couple weeks ago, the company already made something of a splash when it announced plans to roll out a new public stock offering valued at around $300 million. Reports at the time noted that, should the release be based on the share's price at the time of $109.01, that would represent about another 2.75 million shares coming out on the market, about 12% of the shares that were already outstanding. The company planned to use the incoming cash, it noted at the time, for “general corporate purposes.”
At the time, the company lost some ground on the announcement—word that a company is planning to release new shares can do that as it has a way of diluting the value of shares currently in investors' hands—but it's made substantial gains over the last several months to its current level of $138.93 per share. That's well off its high of $176.27 back in mid-February, but still a solid gain.
Silvergate's biggest draw is the Silvergate Exchange Network, a system that offers a payment network for its participants that works at such high speeds it's described as “virtually instantaneous.” That's likely a welcome development for all involved, as even PayPal (NASDAQ:PYPL) struggles with that kind of speed, depending on the services involved.
Additionally, Silvergate also recently revealed plans to connect with Fidelity Digital Assets, which would allow Silvergate to expand its offerings of lending using Bitcoin as collateral. The new connection allows Silvergate to let users take out loans through Silvergate Bank, which in turn are supported by the Silvergate Exchange Network. The Bitcoin used as collateral is in turn held by Fidelity Digital Access, and should the loan terms not be upheld, the Bitcoin involved can be transferred back to Silvergate accordingly.
Steadily Gaining but Plateauing Sentiment
The analyst pool, meanwhile, based on our latest research, is rapidly considering Silvergate a good idea when it comes to investing further.
There has been a “buy” consensus on the company going back to January 2020, where it started with two “buy” and one “hold”. That increased to three “buy” and one “hold” in April 2020, and it maintained that rating all the way into December. December saw the “buy” presence nearly double, going to five “buy” and the one “hold” remained in play. That ratio—with five “buy” and one “hold”—is actually still in place today.
Several price target hikes have also recently been spotted; Canaccord Genuity, just yesterday, issued a hiked price target of nearly double its level before the hike, boosting it from $90 to $150 per share. Wedbush had already hiked its target from $150 to $175 back on March 2, and Craig Hallum, back in February, bumped the assessment up substantially from $80 to $135.
A Rising Tide Really Does Lift All Boats
So now, we have a better idea of what drove that latest share price increase. There's a lot going on under the hood here, and it represents excellent opportunity going forward. New stock and new lending vehicles certainly help the company out, but maybe the biggest point in Silvergate's favor right now is the ongoing fascination with cryptocurrency, especially Bitcoin.
The idea of mainstreaming Bitcoin has always been kind of a dream for cryptocurrency enthusiasts; it was one of the big concepts that drove development in mobile payments, and with good reason. After all, when you get right down to it, cryptocurrencies are essentially a kind of digital money, that works a lot like an online equivalent of a dollar bill, or whatever your choice of fiat currency is. Silvergate's move to make it easier to take out loans using crypto as collateral doesn't exactly help on this front; it makes crypto less a currency and more a commodity like gold. But what it does do is it provides a new use for that cryptocurrency, which helps make it more mainstream and useful.
Between the lending and Silvergate's high-speed payment network—which could be a huge help in terms of establishing cross-border payments strategies—Silvergate is setting itself up to be a major force in cryptocurrency infrastructure. That combination of factors likely has quite a bit to do with Silvergate's latest gains, and for those who think that cryptocurrency will be a big part of commerce to come, may be a good point to invest in owning a piece of that future.
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