Core Scientific, a Bitcoin Miner, Warns of Possible Bankruptcy, Stocks Falling

A group of bitcoin mining units inside a container at the Cleanspark facility in College Park, Georgia, US, on Friday, April 22, 2022.

Elijah Novelj | Bloomberg | Getty Images

Scientific basicOne of the largest publicly traded cryptocurrency mining companies in the United States, has raised the possibility of bankruptcy in a Statement filed with the Securities and Exchange Commission. The company also revealed that it will not make its debt payments due in late October and early November.

Core stock fell 77% Thursday after the deposit.

Where Listing on NASDAQ Through a Special Purpose Acquisition Company, or SPAC, Core’s market capitalization has fallen to $90 million, down from $4.3 billion in July 2021 when the company went public. The stock is now down more than 97% this year. In the event of bankruptcy, Core says its common stock holders could suffer a “complete loss of their investment.”

Basic Scientific Mines for Proof-of-Work Cryptocurrencies like Bitcoin. The process involves running data centers across the country, equipped with highly specialized computers that solve mathematical equations in order to validate transactions and generate new tokens at the same time. The process requires expensive equipment, some know-how, and a lot of electricity.

Core, which mainly makes bitcoin, has seen the price of the token drop from an all-time high above $69,000 in November 2021, to around $20,500. This 70% loss in value, combined with greater competition among miners – and increased energy prices – has compressed it. profit margins.

The crypto miner said that “its operational performance and liquidity have been severely affected by the prolonged decline in the price of bitcoin, and the increase in electricity costs,” as well as the “increase in the hash rate of the global bitcoin network” — a term used to describe the computing power of all the miners in the bitcoin network.

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The filing also blamed “litigation with Celsius Networks LLC and its affiliates” for Core’s financial struggles. Celsius was once one of the biggest names in the crypto lending space, offering nearly 19% annual returns, until it filed for bankruptcy this spring.

despite of Selling Nearly All of His Bitcoin in JuneThe company was valued at $26.6 million in cash. Although Core is self-mining Bitcoin to restock its vaults (Wednesday’s worth of $770,000 worth of Bitcoin), the company still warns that it could run out entirely by the end of the year, if not sooner.

A miner in Austin, Texas, who works in North Dakota, North Carolina, Georgia and Kentucky, says he may “look for alternative sources of equity or debt financing.” The company is also considering selling the assets, as well as delaying larger capital expenditures, including construction projects.

As for its creditors, Core wrote in the filing that they are free to sue the company for non-payment, take action in connection with the collateral, as well as “Choose to accelerate the principal amount of this debt.”

Analysts believe that Chapter 11 bankruptcy is a real possibility.

Compass Point analysts wrote: “With the sharp drop in mining rig prices in 2022, we believe there is a high chance that creditors holding this debt will decide to restructure rather than take possession of collateral.” “However, without knowing how discussions with CORZ’s creditors are going, we believe that the scenario in which CORZ has to provide Chapter 11 protection should be taken seriously, especially if BTC prices fall further from current levels.”

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Core – which is one of the largest providers of blockchain infrastructure and hosting, as well as one of the largest digital asset miners, in North America – is not alone in its struggles. Compute North, which provides hosting and infrastructure services for crypto-mining, filed for Chapter 11 bankruptcy in September, and at least one other miner, Marathon Digital Holdings, has reported $80 million exposure to the bankrupt miner.

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