Core Scientific Announces $400M Convertible Notes Offering

August 14, 2024

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Shares of Bitcoin mining giant Core Scientific took a sharp hit, dropping over 10% after the company revealed plans to raise $400 million through convertible senior notes. This announcement marks a significant increase from the initially planned $350 million offering.

Convertible Notes Offering

Convertible senior notes represent a form of debt security that offers investors the option to convert their holdings into equity at a future date, while also accruing interest. For Core Scientific, this move is an attempt to manage its existing debt and operational costs.

The offering, as detailed in an August 14 press release, is targeted at qualified institutional buyers through a private placement. Investors have the flexibility to either hold these senior, unsecured notes until they mature or convert them into shares of Core Scientific. Interest payments on these notes will be made semi-annually, providing a steady income stream to the investors.

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Additionally, the offering could include a provision allowing purchasers to acquire an extra $60 million in notes. These notes are set to mature on September 1, 2029, unless they are converted, redeemed, or repurchased earlier. Settlement of this offering is expected by August 19.

Strategic Financial Maneuvering

Core Scientific plans to use the net proceeds from this offering to repay outstanding loans under a credit and guaranty agreement dated January 23, 2024, and to redeem all of its senior secured notes due in 2028.

The miner anticipates raising approximately $386.6 million through this process, with the potential to increase the total to $445 million if additional notes are purchased by investors.

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Bankruptcy Details

Core Scientific emerged from bankruptcy in January 2024, following approval of its reorganization plan by the U.S. Bankruptcy Court for the Southern District of Texas. This plan enabled Core Scientific to eliminate $400 million in debt and resume normal operations.

The company’s bankruptcy filing in December 2022 was driven by a confluence of challenges, including the prolonged crypto winter, surging energy costs, increased mining difficulty, and bad debt exposure linked to the failed crypto firm Celsius.

Despite these hurdles, Core Scientific managed a solid restart in the first quarter of 2024, mining 2,825 bitcoins and reporting a net income of $210.7 million. However, the company faced setbacks in the second quarter, posting a net loss of $804.9 million, a stark contrast to the $9.3 million loss recorded in the same period the previous year.

Resilience

Despite the recent financial challenges, Core Scientific remains one of the top players in the Bitcoin mining industry. Year-to-date, the company has mined 5,052 Bitcoin, translating to over $300 million in revenue at current market prices.

Moreover, Core Scientific has recently formed a partnership with AI startup CoreWeave to provide data center services, a venture expected to generate over $100 million in potential revenue.