Core Scientific may declare bankruptcy: Bloomberg Law

According to a Bloomberg Law report dated November 1, bondholders of the Bitcoin mining firm Core Scientific engaged with legal firm Paul Hastings in response to a US Securities and Exchange Commission filing indicating financial difficulty. After the October 26 filing, the mining company could not meet its financial obligations in late October and early November due to the low price of Bitcoin, growing electricity expenses, an increase in the global BTC hash rate, and legal concerns with cryptocurrency lending firm Celsius.

“A group of Core Scientific Inc. convertible bondholders is working with restructuring lawyers at Paul Hastings as the company weighs a potential bankruptcy, according to people with knowledge of the situation.” The report stated.“Investors were rattled after Core Scientific, one of the world’s largest miners of Bitcoin, warned last week that it may run out of cash by the end of the year and could seek relief by filing for bankruptcy. The company’s stock slumped to a low of roughly 20 cents following the disclosure,” It added.

 Following this, Core Scientific is now contemplating potential bankruptcy, with several of its convertible bondholders consulting restructuring lawyers.

The mining company reported $26.6 million in cash and 24 BTC as of October 26, but $880 million in notes payable as of June 30. Following the SEC filing, the price of Core Scientific's stock CORZ on the Nasdaq plunged more than 87%, from $1.01 to $0.17 at the time of publication. As of November 1, the firm was still mining BTC.

Furthermore, Core Scientific claimed in an October 19 court filing that Celsius owed the firm more than $2.1 million in post-petition charges. It would continue to lose roughly $53,000 daily until its financial obligations were met, however, Celsius countered that the mining firm delayed the deployment of its rigs and supplied less power than required under a previously agreed upon contract.

Many organizations in the cryptocurrency field, from mining firms to lending firms, have experienced financial troubles during the May market collapse. TMC previously reported in September, that Compute North Holdings Inc., a Minnesota-based company and one of the biggest operators of crypto-mining data centers, that hosts data centers for bitcoin miners and blockchain businesses, filed for Chapter 11 bankruptcy in Texas. According to the company, it owes at least 200 creditors up to $500 million. Compute North offers hardware, hosting, large-scale crypto mining facilities, hardware, and a Bitcoin mining pool. It is one of the largest data center providers in the United States and has well-known BTC mining industry partners such as Compass Mining and Marathon Digital. Both companies have stated on Twitter that, given the current state of the information, their operations will continue as usual.

FAQs

What prompted bondholders of Core Scientific to engage with legal firm Paul Hastings? 

Bondholders of Core Scientific engaged with legal firm Paul Hastings in response to a US Securities and Exchange Commission filing by the Bitcoin mining firm indicating financial difficulty.

Why has Core Scientific been facing financial difficulties? 

Core Scientific faced financial difficulties due to the low price of Bitcoin, increasing electricity expenses, a rise in the global BTC hash rate, and legal concerns with cryptocurrency lending firm Celsius.

What was the consequence of Core Scientific's financial troubles on its stock price? 

Following the SEC filing about its financial issues, Core Scientific's stock price on Nasdaq dropped by more than 87%, from $1.01 to $0.17.

What did Core Scientific report in terms of its financial status on October 26?

On October 26, Core Scientific reported having $26.6 million in cash and 24 BTC, but also noted $880 million in notes payable as of June 30.

What did Core Scientific claim in its court filing regarding Celsius? 

In an October 19 court filing, Core Scientific claimed that Celsius owed the firm more than $2.1 million in post-petition charges.

How did Core Scientific's stock price react after the disclosure of its financial difficulties? 

After disclosing its financial difficulties, Core Scientific's stock price dropped to a low of approximately 20 cents.

How has the broader cryptocurrency industry been affected by financial troubles? 

Many organizations in the cryptocurrency field, including mining firms and lending firms, experienced financial troubles, particularly during the market collapse in May.

How did Compute North Holdings Inc., another player in the crypto industry, deal with financial difficulties? 

Compute North Holdings Inc., a major operator of crypto-mining data centers, filed for Chapter 11 bankruptcy in Texas due to financial difficulties. It owed up to $500 million to around 200 creditors.

What is Core Scientific's current stance despite its financial challenges? 

Despite its financial difficulties, as of November 1, Core Scientific was still actively mining BTC.

What is the sentiment shared by some well-known BTC mining industry partners in response to financial challenges? 

Compass Mining and Marathon Digital, both well-known BTC mining industry partners, have stated on Twitter that their operations will continue as usual despite the financial challenges faced by the broader industry.