Core Scientific’s 104 megawatt Bitcoin mining data center in Marble, North Carolina
Core Scientific, one of the largest publicly traded cryptocurrency 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.
Basic science mines for proof-of-work cryptocurrencies like bitcoin. The process involves powering data centers across the country, filled with highly specialized computers that crunch mathematical equations in order to validate transactions and simultaneously create new tokens. The process requires expensive equipment, some technical know-how and a lot of electricity.
Core’s market capitalization fell to $78 million by the end of trading on Tuesday, 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 is down more than 98% in the last year.
The company is still generating positive cash flow, but that cash is not enough to pay off debt financing for equipment it leases, according to a person familiar with the company’s situation. The company will not be liquidated but will continue to operate as normal while it reaches a deal with senior bondholders, who hold most of the company’s debt, according to this person, who declined to be identified discussing company confidential matters.
Core previously said in a filing in October 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 agreement with holders of Core’s convertible notes is structured in such a way that if, in fact, the business environment for bitcoin improves, holders of common stock may not disappear entirely. The company also revealed it would not make its debt payments due in late October and early November — and said creditors were free to sue the company for non-payment.
Core, which primarily issues bitcoin, has seen the token’s price fall from an all-time high of over $69,000 in November 2021 to around $16,800. of profit margin.
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 “increasing the global hash rate of the bitcoin network” — a term used to describe the computing power of all miners on the bitcoin network.
Crypto lender Celsius, which filed for bankruptcy in July, was a key customer. When Celsius’ debts were wiped out during the bankruptcy process, it put pressure on Core’s balance sheet, in yet another example of the contagion effect that has rippled through the cryptocurrency space this year.
Core – which is one of the largest providers of blockchain infrastructure and hosting, as well as one of the largest miners of digital assets, in North America – is not alone in its difficulties.
Compute North, which provides hosting services and infrastructure for cryptocurrency 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 cryptocurrency mining company, reported second-quarter net losses of more than $100 million in August and put expansion plans in Texas on hold. And Argo shares plunged 60% after it announced on Oct. 31 that its plan to raise $27 million with a “strategic investor” was no longer happening.