Core Scientific’s 104-megawatt bitcoin mining data center in Marble, North Carolina
Carey McKelvey
Core Scientific, one of the largest publicly traded crypto mining companies in the U.S., 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.
Core Scientific is mining for Proof-of-Work cryptocurrencies like Bitcoin. The process involves powering data centers across the country, packed with highly specialized computers that process mathematical equations to validate transactions while creating new tokens. The process requires expensive equipment, some technical know-how, and a lot of electricity.
Core’s market cap had fallen to $78 million at Tuesday’s close, down from a valuation of $4.3 billion in July 2021 when the company went public via a Special Purpose Acquisition Vehicle (SPAC). The stock is down more than 98% over the past year.
The company is still generating positive cash flow, but that cash isn’t enough to pay off financing debt on leased equipment, according to a person familiar with the company’s situation. The company will not be liquidated but will continue to operate normally while an agreement is reached with the senior security bondholders who hold the bulk of the company’s debt, according to this person, who declined to be identified to discuss confidential company matters.
Core had previously said in an October filing that holders of its common stock could suffer “a total loss of their investment,” but that may not be the case if the broader industry recovers. The deal cut with Core convertible debenture holders is structured in such a way that if the business environment for Bitcoin actually improves, common stock holders may not be wiped out entirely. The company also said it would default on its debt payments due in late October and early November – and said creditors are free to sue the company for non-payment.
For Core, which mostly mints Bitcoin, the token’s price has fallen to around $16,800 from an all-time high above $69,000 in November 2021. That depreciation, coupled with greater competition among miners — and increased energy prices — has lessened, it is profit margins.
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The Austin, Texas-based miner, who has operations in North Dakota, North Carolina, Georgia and Kentucky, said in his October filing that “operating performance and liquidity have been driven strongly by the ongoing decline in bitcoin price, the surge electricity costs” and “the increase in global bitcoin network hashrate” – a term used to describe the computing power of all miners on the bitcoin network.
Crypto lender Celsius, which filed for bankruptcy protection in July, was a core client. As Celsius’ debt was paid off during bankruptcy proceedings, it took a toll on Core’s balance sheet, another example of the contagion effect sweeping the crypto sector this year.
Core — one of the largest blockchain infrastructure and hosting providers, 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 another miner, Marathon Digital Holdings, announced an $80 million exposure to Compute North.
Meanwhile, Greenidge Generation, a vertically integrated cryptocurrency miner, reported second-quarter net losses of more than $100 million in August and paused plans to expand into Texas. And Argo’s shares plunged 60% after announcing on Oct. 31 that a plan to raise $27 million from a “strategic investor” had fallen through.
