Core Scientific, one of the largest publicly traded crypto mining companies in the U.S., reportedly filed for Chapter 11 bankruptcy protection in Texas early Wednesday morning, according to CNBC, citing a person familiar with the company’s finances.
Core Scientific Files for Bankruptcy, But Still Plans to Continue Operation
The bear market has proved to be a disastrous thing to ever happen to the crypto market. While some companies are crashing, some are laying off staff extravagantly. The latest on the list of companies filing for bankruptcy now is Core Scientific, a crypto mining firm that operates for proof-of-work (PoW) cryptocurrencies like Bitcoin.
According to CNBC, citing a person familiar with the company’s situation, though Core Scientific is still generating a good amount of cash flow, the cash is not enough to pay off the financing debt owed on equipment it was leasing. Furthermore, the company does not plan to liquidate but to continue operation while reaching a deal with senior security noteholders, which holds a substantial debt.
Notably, the Core Scientific deal with its convertible note holders is organized so that even if the business environment for Bitcoin makes some moves, ordinary equity holders may not get totally affected. The company has also stated that creditors are free to file a lawsuit against it for nonpayment as it would not make its debt payments coming due in late October and early November.
Core Scientific Stock Plunges
The company’s operation involves powering data centers across the country, being used to mine. Core Scientific provides the mining operation with the necessities like highly specialized computers that solve math equations to validate transactions and simultaneously create new tokens. Most of the company’s operational needs deal with expensive equipment, some complicated technicals, and a massive amount of electricity.
Alongside the market conditions, Core’s market capitalization had plummeted from a $4.3 billion valuation in July 2021 when the company went public through a particular purpose acquisition vehicle, or SPAC, to $78 million as of the end of trading Tuesday. So far, the stock has fallen more than 98% in the last year.