Bitcoin miner Core Scientific filing for bankruptcy, will keep mining

Core Scientific, one of the largest publicly traded crypto mining companies in the US, filed for Chapter 11 bankruptcy protection in Texas early Wednesday morning, according to a person familiar with the company’s finances. The move follows a year of falling cryptocurrency prices and rising energy prices.

Nuclear science mines for proof-of-work cryptocurrencies like bitcoin. The process involves powering data centers across the country, packed with highly specialized computers that crunch mathematical equations to validate transactions while simultaneously creating new tokens. The process requires expensive equipment, some technical expertise and a lot of electricity.

Core’s market capitalization fell to $78 million by the end of trading Tuesday, down from a valuation of $4.3 billion in July 2021 when the company went public through a special purpose acquisition vehicle, or SPAC. The stock has fallen more than 98% in the past year.

The company continues to generate positive cash flow, but that cash is not sufficient to repay financing debt on equipment it has leased, according to a person familiar with the company’s situation. The company will not liquidate but will continue to operate normally while an agreement is reached with senior security noteholders, who hold most of the company’s debt, according to this person, who declined to be named to discuss confidential company matters. discuss.

Core previously said in an October filing that holders of its common stock could suffer “a total loss of their investment,” but that may not be the case if the overall industry recovers. The deal cut with Core’s convertible noteholders is structured so that if the business environment for bitcoin does in fact improve, common stock holders may not be completely wiped out. The company also disclosed that it would not make its debt payments due in late October and early November – and said creditors were free to sue the company for default.

Core, which primarily coins bitcoin, has seen the price of the token fall from an all-time high above $69,000 in November 2021, to around $16,800. his profit margins.

The Austin, Texas-based miner, which has operations in North Dakota, North Carolina, Georgia and Kentucky, said in its October filing that “operating performance and liquidity have been severely impacted by the prolonged decline in the price of bitcoin, the increase in electricity costs,” as well as “the increase in the global bitcoin network hash rate” — a term used to describe the computing power of all miners in the bitcoin network.

Crypto lender Celsius, which filed for bankruptcy protection in July, was a core client. When Celsius’ debt was wiped out during its bankruptcy proceedings, it put a strain on Core’s balance sheet, in yet another example of the contagion effect sweeping the crypto sector this year.

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 struggle.

Compute North, which provides hosting services and infrastructure for crypto mining, filed for Chapter 11 bankruptcy in September, and another miner, Marathon Digital Holdings, reported an $80 million exposure to Compute North.

Meanwhile, Greenidge Generation, a vertically integrated crypto miner, reported net losses of more than $100 million in the second quarter in August and hit ‘pause’ on plans to expand into Texas. And shares in Argo fell 60% after its announcement on Oct. 31 that its plan to raise $27 million with a “strategic investor” was no longer happening.