Bitcoin miner Core Scientific’s shares continue to fall post bankruptcy-warning announcement

Core Scientific is the second bitcoin mining firm faced with bankruptcy.
Stagnant BTC prices may fall further during and post midterms.
Rising energy rates and hash rates hurting miners’ profits.

Another one bites the dust?

Core Scientific, the largest Bitcoin mining company by computing power, has just warned its investors that it may face the same fate as Compute North.

In an 8K filing, the mining firm warned its investors that it would consider filing for bankruptcy towards the end of this year if its financial status does not improve.

An 8K form is filed by companies to disclose major events and updates relevant to investors. The SEC is the authority which enforces its issuance.

Core Scientific’s (CORZ) share price fell sharply on Friday. Shares fell 77% to US 23 cents.

On September 22nd, Bitcoin mining company Computer North filed for bankruptcy due to poor market conditions, rising energy costs and the legal case involving Celsius. Compute North cited the same challenges as Core Scientific – low Bitcoin prices and

The company noted that a crypto winter, rising energy costs, rising Bitcoin hash rates and the Celsius case have “severely impacted the company’s operating performance and liquidity.”

The company said the “management has been actively taking steps to decrease monthly costs, delay construction expenses, reduce and delay capital expenditures and increase hosting revenues. In addition, the Board has decided that the Company will not make payments coming due in late October and early November 2022 with respect to several of its equipment and other financings, including its two bridge promissory notes.”

Essentially, Core Scientific warned its investors that due to the non-payment of debt which was incurred as capital requirement creditors may choose to sue the company among other measures that can be exercised in the event of default.

Crypto winter is the moniker used to refer to the bearish cryptocurrency markets which saw multiple businesses file for bankruptcy. Early investors, bitcoin mining corporations and even financial services companies have pulled the shutters – for good – because of Bitcoin’s stagnant prices and the April crypto market crash.

What is Core Scientific doing about its financial condition?

The mining firm has hired “Weil, Gotshal & Manges LLP, as legal advisers, and PJT Partners LP, as financial advisers” to improve its financial condition by evaluating alternative strategies and “initiatives to improve liquidity.” With these advisers, the company has engaged in discussions with “certain of its creditors regarding these initiatives.”

The company noted that the discussions may not lead to any desirable result and further warned: “Furthermore, the Company may seek alternative sources of equity or debt financing, delay capital expenditures or evaluate potential asset sales, and potentially could seek relief under the applicable bankruptcy or insolvency laws.”

“In the event of a bankruptcy proceeding or insolvency, or restructuring of our capital structure, holders of the Company’s common stock could suffer a total loss of their investment.”

According to the form, the company held 24 Bitcoins and $26.6 million in cash. As on September 30th, the company held “1,051 bitcoins and approximately $29.5 million in cash.”

Core Scientific sold 13,354,892 shares of B. Riley for $20.7 million. The proceeds will be used “for working capital purposes, including payment of adviser fees and expenses.”