Bitcoin Miner Core Scientific Files For Chapter 11 Bankruptcy
Core Scientific, one of the largest publicly traded cryptocurrency mining companies in the United States is filing for Chapter 11 bankruptcy. The company however plans to keep mining.
According to reports by CNBC and Reuters, Core Scientific, one of the largest publicly traded crypto mining companies in the U.S. filed for Chapter 11 bankruptcy protection in Texas on Wednesday. The company’s decision comes as its stock is down 98% this year amid plunging crypto prices and rising energy costs making mining a more difficult business to sustain. The company indicated that it still generates positive cash flow and plans to continue its operations while it pays its debtholders.
The company mines for proof-of-work (PoW) cryptos such as Bitcoin which involves powering data centers across the U.S., packed with specialized computers that validate transactions and create new tokens. Given the sophisticated equipment needed for this process, the technical expertise required, and the large amounts of electricity it uses, it is understandable that it is a costly enterprise.
Core’s stock has fallen more than 98% in the last year, and its market capitalization stood at $78 million at the end of trading on Tuesday, down from a valuation of $4.3 billion in July 2021 when the company went public via a special purpose acquisition vehicle (SPAC). According to a person familiar with the company’s situation, Core is still generating positive cash flow, but it is not sufficient to repay its financing debt owed on equipment it was leasing. Although it did file for Chapter 11 bankruptcy, the company will not liquidate and will continue normal operations while it attempts to strike a deal with senior security noteholders.
According to Reuters, in a statement on Wednesday, Core Scientific said its creditors have agreed to provide up to $56 million in debtor-in-possession financing. One of the company’s largest creditors, B. Riley Financial Inc, offered $72 million last week to avoid the company from going bankrupt. Core Scientific said in its bankruptcy petition that it has $1 billion to $10 billion in assets and liabilities and between 1,000 and 5,000 creditors.
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