Core Scientific, one of the world’s largest Bitcoin miners, announced on Wednesday that it has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas.
According to a press release, the Texas-based miner would continue its self-mining and hosting operations during the process without liquidating as it expects to complete a comprehensive restructuring transaction.
“In connection with the Restructuring Support Agreement, the Ad Hoc Noteholder Group has agreed to provide commitments for a debtor-in-possession facility (the “DIP Facility”) of up to $56 million and has agreed to support the syndication of up to an additional $19 million in new money DIP Facility loans to all holders of convertible notes,” said the company.
With this, Core Scientific has become the first publicly traded mining firm to file for bankruptcy amid the ongoing bear market. After rising over 500% during 2020 and 2021, Bitcoin – the largest cryptocurrency in terms of market cap, has plummeted by around 70% this year, according to Coingecko data.
Along with the dropping prices, soaring electricity costs have taken a toll on the mining industry. Also, the asset’s growing mining difficulty has exacerbated the situation.
Even though the company maintains a positive net cash flow, its income isn’t enough to cover the financing cost of mining equipment.
Core Scientific, which got listed on the Nasdaq through a SPAC (Special Purpose Acquisition Vehicle) in January 2022, had first indicated of a potential bankruptcy in Oct. this year, saying it was exploring options to avoid such an incident.
“Given the uncertainty regarding the company’s financial condition, substantial doubt exists about the company’s ability to continue as a going concern for a reasonable period of time,” the company had said in an SEC filing.
After shedding over 90% in 2022, last week, Core Scientific’s stock price rose nearly 200% following a $72 million financing proposal from a current creditor, B. Riley. On Wednesday, the stock was down 75%.
