Core Scientific, one of the industry’s largest Bitcoin miners, today announced that it has filed for Chapter 11 bankruptcy protection in Texas.
Importantly, the miner will continue its operations during this process, and it “expects to enter into a restructuring support agreement (the “Restructuring Support Agreement”) with the Ad Hoc Noteholder Group, representing more than 50% of the holders of its convertible notes.”
The noteholder group will also supply up to $56 million in financing as part of a debtor-in-possession facility “to provide the necessary financing to effectuate the planned restructuring.”
The news comes amid the ongoing bear market, which has seen the price of Bitcoin plunge more than 60% year-to-date. This, as well as soaring energy prices and the asset’s growing mining difficulty, which earlier this week jumped another 3%, means miners need to allocate more resources to produce the same amount of coins as before.
The Austin-based company announced it would go public through a special purpose acquisition vehicle, or SPAC, in July 2021, with the company’s stock listed on the Nasdaq in January 2022.
Core Scientific has, however, seen its stock tank 98% in 2022 so far. While the company is still generating cash flow, its equipment financing obligations are said to be far outweighing revenues.
The company’s market capitalization fell from $4.3 billion in July last year to $78 million at the closing bell on Tuesday.
Core Scientific did not immediately respond to a request for comment from Decrypt.
Is Core’s bankruptcy unexpected?
The company, which has also operations in North Dakota, North Carolina, Georgia, and Kentucky, first warned of a possible bankruptcy in October this year, saying it was exploring several options.
“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,” Core said at the time.
Bankrupt crypto lender Celsius’ court documents also revealed it owes Core Scientific millions of dollars in unpaid electricity tariffs. According to the firm, it is losing approximately $53,000 per day to cover what Celsius has refused to pay.
Earlier this month, Core received a $72 million offer from one of its top lenders B. Riley, which said that “bankruptcy is not necessary at all” for the company and “the vast majority of Core Scientific’s issues are self-imposed and can be corrected with an open, transparent discussion and ongoing participation” with its lenders and investors.
The investment bank proposed a new financing plan, which involved providing non-cash payment funds on favorable terms with a runway of more than two years for Core Scientific to achieve profitability.
While Core would be the first publicly-listed company to file for bankruptcy, it is not the first casualty of the industry turmoil.
Bitcoin mining data center firm Compute North filed for bankruptcy in September, saying it owed as much as $500 million to at least 200 creditors. Rival companies Riot Blockchain (RIOT) and Marathon Digital Holdings (MARA) are staying afloat; however, their stock is down 83% and 88% this year, correspondingly.