Core Scientific, one of the largest publicly traded cryptocurrency miners in the US, is filing for bankruptcy, but still plans to continue mining while paying its debts.
CNBC quoted an informed source as saying that Core Scientific was filing for bankruptcy protection in the state of Texas (USA) on the morning of December 21. The move comes after a year of plunging crypto prices and soaring energy prices.
Core’s market capitalization fell to $78 million at the close of trading on Dec. 20, down sharply from a valuation of $4.3 billion in July 2021 when the company went public through a buyback company. special purpose, or SPAC.
According to a source familiar with the situation, Core is still generating positive cash flow, but that cash isn’t enough to pay off debt financing the equipment the company leases. Core will not liquidate the equipment, instead will continue to operate normally pending an agreement with senior security creditors, who hold the majority of the company’s debt. Core also revealed it would not make debt payments due in late October and early November 2022, saying creditors have the right to sue the company for nonpayment.
In an October 2022 filing, Core said holders of the company’s common stock could experience “an entire investment loss,” but that may not be the case if the industry as a whole recovers. The reduction in the agreement with Core’s convertible bondholders is structured in such a way that, in fact, if the business climate for Bitcoin improves, holders of common stock may not completely erased.
Core, which primarily mines Bitcoin, has seen the price of the coin drop from an all-time high above $69,000 in November 2021 to around $16,800 today. Core said that “operating performance and liquidity have been severely impacted by the prolonged decline in Bitcoin prices, increasing electricity costs,” as well as “the increase in the hash rate of the global Bitcoin network.”
Core is not alone in this struggle as crypto lender Celsius, which filed for bankruptcy protection in July 2022, is a core customer. When Celsius’s debts were written off during bankruptcy, it put a strain on Core’s balance sheet, which is a pretty stark example of the domino effect spreading across the crypto sector . died this year.
Compute North, which provides storage and infrastructure for cryptocurrency mining, also filed for bankruptcy in September 2022. Greenidge Generation, the integrated cryptocurrency mining company, reported a net loss for the second quarter of 2022 of more than $100 million and “paused” its expansion plan to Texas.