Bitcoin miner Core Scientific files for bankruptcy

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Publicly traded bitcoin mining company Core Scientific (CORZ) filed for Chapter 11 bankruptcy protection in a federal bankruptcy court in the Southern District of Texas early Wednesday morning.

The bankruptcy filing, according to the company’s announcement, was the result of a combination of a falling bitcoin price, rising electricity costs needed to power its data centers, and the “failure of certain of its hosting customers to honor their payment obligations”.

The bitcoin-specific data processing and hosting company said in its Chapter 11 petition that it has between $1 billion and $10 billion in estimated assets and liabilities, between 1,000 and 5,000 creditors, and that its funds are available for distribution to unsecured creditors.

Shares of Core Scientific were down more than 25% in premarket trading on Wednesday.

Core Scientific went public through a SPAC merger in April 2021. By November 2021, shares had closed as high as $14.32 per share. The stock has fallen more than 98% this year.

Bitcoin (BTC-USD) has sold 65% this year at $16,865 from $47,881 per coin. Coupled with soaring energy prices, bitcoin mining companies have been particularly hard hit. Compute North, another major Texas-based bitcoin mining operator, filed for bankruptcy in September, owing up to $500 million to at least 200 creditors.

More recently, Greenidge Generation (GREE), another public miner based in Dresden, New York, said it had to renegotiate approximately $74 million in debt owed to NYDIG for the purchase of mining equipment. If the company is unable to restructure its debt, it can file for bankruptcy. Even if bankruptcy is averted, “the company’s prospects of operating a viable hosting business are uncertain,” Greenidge said in a filing.

On October 26, Core Scientific showed clear signs of strain, announcing in a filing with the SEC that it would not repay debt owed in October and November. In the next 24 hours, his stock fell more than 76%. In recent months, shares of Core Scientific have traded like a penny stock, floating between twenty and forty cents per share.

The story continues

Workers install a new row of bitcoin mining machines at the Whinstone US Bitcoin mining facility in Rockdale, Texas on October 9, 2021. (Photo by Mark Felix / AFP) (Photo by MARK FELIX/AFP /AFP via Getty Images)

The company has also been embroiled in the ongoing Celsius Network and BlockFi bankruptcies, with Core alleging the company was losing nearly $2 million a month after Celsius’ Chapter 11 filing, while BlockFi emerged in the fall in as Core’s creditor, on the hook for up to $60 million in loans.

During its Chapter 11 process, Core Scientific plans to continue operating its own bitcoin mining and hosting business “which remains significantly cash flow positive on a debt-free basis,” according to its release. bankruptcy.

As part of the company’s restructuring, Core also formed an “ad hoc group of noteholders” who agreed to commit up to $75 million in loans through an “obligor-in-possession” facility. These loans, in addition to the daily profits from bitcoin mining, will finance the restructuring of the company.

According to Matthew Sigel, head of digital asset research at financial products issuer, VanEck, the distress of Bitcoin mining companies has consistently contributed to the sell-off of the largest cryptocurrency. This sale of mining lead will likely continue until 2023, says Sigel.

We believe it is possible, and possibly likely, that Bitcoin will test the $10,000-$12,000 level amid a wave of [bitcoin] miner bankruptcies, Sigel said at a recent press briefing.

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