Bitcoin miner Core Scientific warns it could go bankrupt, shares plunge

Bitcoin miner Core Scientific warns it could go bankrupt, shares plunge

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

Elijah Novel | Bloomberg | Getty Images

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

Core’s stock was down as much as 77% Thursday after the filing.

Since listing on Nasdaq through a special purpose acquisition company, or SPAC, Core’s market value has fallen to $90 million, down from a valuation of $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 a bankruptcy, Core says holders of common stock could suffer “a total loss of their investment.”

Nuclear mines for proof-of-work cryptocurrencies such as bitcoin. The process involves running 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 know-how and a lot of electricity.

Core, which primarily mints bitcoin, has seen the price of the token fall from a record high above $69,000 in November 2021, to around $20,500. That 70% loss in value, along with greater competition among miners – and increased energy prices – has compressed profit margins.

The cryptominer said its “operational performance and liquidity have been severely affected by the prolonged decline in the price of bitcoin, the increase in electricity costs,” as well as the “increase in the global bitcoin network’s hash rate” — a term used to describe the computing power of all 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, posting annualized returns of nearly 19%, until it filed for bankruptcy this spring.

Despite selling almost all of its bitcoin in June, the company is down to $26.6 million in cash. Although Core itself mines bitcoin to replenish its own coffers (bitcoin worth $770,000 on Wednesday), the company still warns that it could run out of stock by the end of the year, if not sooner.

The Austin, Texas-based miner, which has operations in North Dakota, North Carolina, Georgia and Kentucky, says it may “seek alternative sources of equity or debt financing.” The company is also considering the sale of assets, as well as postponing major capital expenditure, including building projects.

As for the creditors, Core wrote in the filing that they were free to sue the company for non-payment, take action with respect to collateral, as well asto elect to accelerate the principal of such debt.”

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 services and infrastructure for crypto mining, filed for Chapter 11 bankruptcy in September, and at least one other miner, Marathon Digital Holdings, reported an $80 million exposure to the bankrupt mining company.

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