Valens Equity Weekly Insights - 2022 08 16
Silvergate Capital (SI) has built a robust banking network for the cryptocurrency industry, driving massive growth and network effects in the process. Uniform Accounting highlights that the market is missing Silvergate's value proposition and profitability and growth potential, indicating equity upside.Silvergate Capital was an early partner to the cryptocurrency industry, building its network as early as 2013. Over the last decade, the business has created massive network effects within the industry, driving sustainable growth and opportunities for ROE expansion. The market is currently pricing in decelerating growth and lower than expected Uniform ROE going forward, signaling the potential for equity upside as the business continues executing.
Management confidence in the Q2 earnings call about the SEN and their deposit costs
highlights that the company still has fundamental momentum even during a volatile crypto market.
SI
Silvergate Capital is a bank holding company. Through its subsidiary Silvergate Bank, the company provides a banking platform for innovators, especially in the digital currency industry, and developing product and service solutions addressing the needs of entrepreneurs. The company serves clients in the United States.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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