Nasdaq-listed Bitcoin miner Core Scientific has filed for Chapter 11 bankruptcy, citing low Bitcoin prices and high costs.
Core Scientific, one of the largest Bitcoin miners in the industry, announced today that it has filed for Chapter 11 bankruptcy protection in Texas.
Importantly, the miner will continue operations during this process, and that it “expects to enter into “Restructuring Support Agreement” with the Ad Hoc Shareholders Group, which represents more than 50% of the holders of its convertible notes.”
The shareholder group will also provide up to $56 million in financing as part of a debt recovery facility “to provide the necessary funding to carry out the planned restructuring.”
The news comes amid the current bear market, which has seen the price of Bitcoin fall by more than 60% so far this year. This, coupled with rising energy prices and the increasing difficulty of mining the asset, which earlier this week rose 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 shares trading on the Nasdaq in January 2022.
However, Core Scientific has seen its shares plunge 98% in 2022 to date. Although the company continues to generate cash flow, its equipment financing obligations are said to far exceed revenues.
The company’s market capitalization fell from $4.3 billion in July last year to $78 million at Tuesday’s close.
Core Scientific did not immediately respond to a request for comment from Decrypt.
Is Core Scientific’s bankruptcy unexpected?
The company, which also has operations in North Dakota, North Carolina, Georgia and Kentucky, first warned of possible bankruptcy in October of this year, saying it was exploring several options.
“Given the uncertainty about the company’s financial condition, there are substantial doubts about its ability to continue as a going concern for a reasonable period of time,” Core said at the time.
Court documents from bankrupt cryptocurrency lender Celsius also revealed that it owes Core Scientific millions of dollars in unpaid electricity fees. According to the firm, it is losing approximately $53,000 a day to cover what Celsius has refused to pay.
Earlier this month, Core received a $72 million offer from one of its major lenders, B. Riley, which stated that “bankruptcy is absolutely not necessary” for the company and that “the vast majority of Core Scientific’s problems are self-imposed and can be corrected with open and transparent discussion and continued engagement” with its lenders and investors.
The investment bank proposed a new financing plan, which was to provide non-cash payment funds on favorable terms with an extension of more than two years for Core Scientific to reach profitability.
Although Core would be the first publicly traded company to file for bankruptcy, it is not the first victim of industry turmoil.
Bitcoin mining data center company Compute North filed for bankruptcy in September, claiming 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 shares are down 83% and 88% this year, respectively.