By the end of trading on Tuesday, the company’s market capitalization had dropped to $78 million from a $4.3 billion valuation in July 2021 when the company went public.
Major crypto mining company Core Scientific (NASDAQ: CORZ) is expected to file for Chapter 11 bankruptcy protection in Texas early on Wednesday morning. This is according to a source familiar with the company’s financials. The firm, which is one of the largest publicly traded crypto mining companies in the United States, is yet another victim of this year’s tanking crypto prices and the rising cost of energy.
Core Scientific which is based in Austin, Texas, and has operations in North Dakota, North Carolina, Georgia, and Kentucky, uses the energy-intensive proof-of-work consensus for mining cryptocurrencies such as Bitcoin. While the miner is currently generating positive cash flow, it cannot afford to service the debt incurred on equipment leases. According to CNBC, an anonymous source reveals that the company does not plan to liquidate. It will instead continue normal operations as it seeks to close a deal with senior security noteholders, which hold the bulk of the company’s debt.
This comes following last week’s proposed $72 million financing plan – expected to give the mining company “more than two years of runway” to achieve profitability – which resulted in a 200% price surge over four days. Core Scientific’s stock price is down 98% year-on-year. By the end of trading on Tuesday, the company’s market capitalization had dropped to $78 million from a $4.3 billion valuation in July 2021 when the company went public.
During an initial filing in October, the company stated that holders of its common stock stood to make a total loss on their investments. It, however, may not come to that if the overall crypto industry recovers. The miner also revealed that it had missed debt payments coming due in late October and early November, informing creditors that they were at liberty to sue for nonpayment.
The filing explained that “operating performance and liquidity have been severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs” in addition to the increase in the Bitcoin network’s hash rate. The company was also affected by the loss of its customer, crypto lender Celsius which filed for bankruptcy in July.
Other businesses affected by the spreading market contagion include hosting and crypto mining infrastructure provider Compute North which filed for Chapter 11 bankruptcy in September and miner Marathon Digital Holdings which went on to report an $80 million exposure to Compute North. Vertically integrated miner Greenidge Generation reported Q2 losses of over $100 million and halted plans to expand into Texas.
Mercy Mutanya is a Tech enthusiast, Digital Marketer, Writer and IT Business Management Student.
She enjoys reading, writing, doing crosswords and binge-watching her favourite TV series.
