Core Scientific (CORZ), the world’s largest publicly traded Bitcoin (BTC) miner, is in danger of becoming insolvent and bankrupt. According to the latest quarterly results sent to shareholders, the company’s reserves are at their end. As per the data presented, the company sold virtually all of its BTC reserves throughout October. Therefore, Core Scientific runs the risk of running out of cash by the end of the year. The report warned that the company could file for bankruptcy if it does not improve its financial condition. The warning issued on Thursday (27) caused widespread panic among investors, who sold CORZ shares. As a result, the stock price plummeted to $0.23, down an impressive 77%.
Bookings almost over
The metric that drew the most attention was the level of reduction in the miner’s BTC reserves, which had 1,051 BTC on September 30. However, the results show that as of October 26, Core Scientific only had 24 BTC in cash. Although the miner used part of the proceeds from BTC sales to reinforce cash, it was not enough. The situation is so drastic that the mining company’s reserves are only US$ 26 million, or R$ 139 million at the current price. But this amount is not enough to cover the company’s current monthly expenses. The low level of cash, according to the mining company, indicates that the company is unable to maintain itself. Core Scientific estimates that cash resources will be depleted by the end of the year, possibly sooner. “There are substantial doubts about the company’s ability to continue operating for a reasonable period of time,” the statement said. The miner is exploring a number of strategic alternatives to raise additional capital. It hired Weil, Gotshal & Manges LLP as legal advisors and PJT Partners LP as financial advisors. If capital raising alternatives fail, the company may have to file for bankruptcy protection, Core Scientific said.
bankruptcy signs
The miner has started to show signs of attention in recent days, saying it will not make loan payments at the end of October. Other installments due in early November 2022 will also not be paid. Loans concern funds to invest in fixed capital, particularly mining equipment, as well as other financing. Now, creditors can decide to sue the company for non-payment or take other measures. In the document, the company said that the devaluation of BTC contributed to the financial situation, as expected. As the price of Bitcoin fell, mining profit also declined, affecting shares of listed miners. However, the company says it is hopeful that creditors will approve a restructuring plan for Core Scientific and thus avoid the company having to file for bankruptcy “With the substantial decline in mining rig prices in 2022, we believe there is a significant chance that creditors holding that debt will decide to restructure rather than take collateral,” Compass Point said.
optimism of some
With the delicate situation, CORZ shares suffered strong selling pressure and practically turned to dust. BTIG, for example, cut the stock’s recommendation from “buy” to “neutral.” “We expect this excess liquidity will prevent CORZ from expanding its hash capacity and delay the company’s ability to secure new hosting customers. This obscures the company’s short-term growth prospects,” the investment bank said. Core Scientific’s woes reflect the delicate moment experienced by the Bitcoin mining industry, with companies squeezed between high electricity costs and falling cryptocurrency prices. One of Core Scientific’s peers, Compute North, filed for bankruptcy in September as it accumulated debt of up to $500 million to at least 200 creditors.
