Core Scientific, one of the most prominent publicly-traded cryptocurrency mining companies in the United States, filed for Chapter 11 in Texas on Wednesday. However, it will continue mining bitcoin throughout the process.
Core's market cap had dropped to $78 million as of Tuesday, down from a $4.3 billion valuation when the business went public via a SPAC in July 2021. Its stock has plunged by more than 98 percent this last year.
The company mines proof-of-work coins such as Bitcoin by equipping data centers with specialized computers that compress math equations to verify transactions and generate new tokens. This mining procedure requires costly equipment, technical knowledge and electricity.
However, its positive cash flow is grossly inadequate to repay the financing debts incurred on the appliances it rents. Despite this, Core will not liquidate, according to CNBC. It will continue operations as usual while negotiating a settlement with senior security noteholders, who control most of the company's debt.
The company, one of North America's largest providers of blockchain infrastructure and hosting, previously said in October that widespread stockholders could lose their entire investment, but this may not be the case if the industry stabilizes.
The agreement signed with Core's convertible note holders is designed so that common equity holders may only be partially wiped out if the crypto business climate strengthens.
Core also said it would not create debt payments due in late October and early November. Creditors are allowed to file a lawsuit against the company for nonpayment.
The price of Bitcoin fell from a record-breaking high of more than $69,000 in November 2021 to around $16,800. Due to the decline in value, competitive pressures among miners and increased energy prices, Core's profit margins have shrunk.
The Texan-based miner said in a filing with the U.S. Securities and Exchange Commission that the decline of Bitcoin and the rise in electricity costs had significantly impacted its operating performance and liquidity.
Crypto winter leaves crypto companies in turmoil
Core is just one of many crypto companies struggling in this year's crypto winter. Celsius, a crypto lender that filed bankruptcy in July, was a Core customer. The discharge of Celsius' debts during its bankruptcy process put pressure on Core's balance sheet.
In September, Compute North, which offers crypto mining hosting services and infrastructure, also filed for Chapter 11. Compute North's financier, Generate Capital, said that the firm asserted several "technical events of default" in July as crypto prices plummeted during Three Arrows Capital's implosion.
Marathon Digital, a competitor of Core, said it expected to recoup only about half of the $50 million deposited with Compute North in exchange for services.
Greenidge Generation (GREE), a vertically integrated cryptocurrency miner, revealed massive second-quarter losses of more than $100 million in August and threw plans for expansion into Texas on hold. It reached a debt restructuring agreement with NYDIG on Tuesday, allowing the company to avoid bankruptcy for the time being.
Meanwhile, Argo's stock dropped 60 percent after the company announced on October 31 that its plan to raise $27 million with a "strategic investor" had been scrapped.