Leading Bitcoin (BTC) mining company Core Scientific has issued a filing that suggests that it may not be able to pull through with debts in the coming months as there is not enough cash flow to service such debts and is, therefore, considering a bankruptcy option. In the hours following this announcement, the shares price of the bitcoin miner tanked significantly.
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At the time of this writing, it had fallen by more than 78% leaving it at $0.22, a long dip from $1.01 which it closed trade on Wednesday.
“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.
As a result, the creditors under these debt facilities may exercise remedies following any applicable grace periods, including electing to accelerate the principal amount of such debt, suing the Company for nonpayment, or taking action with respect to collateral, where applicable,” the court filing with the United States Securities and Exchange Commission (SEC) stated.
Core Scientific Likely to File For Bankruptcy
In view of this, with assistance from a few legal experts, the company is considering strategic alternatives including hiring strategic advisers, engaging in liability management transactions, raising additional funds, or even restructuring its existing capital structure.
In case, these alternatives prove abortive, filing for bankruptcy is the final resort of the firm especially, in order to relieve itself from creditors’ lawsuits.
If it has to come to bankruptcy, holders of the company’s stock could suffer a total loss of their investments, the filing outlined.
Core Scientific came into this position due to the ongoing downtrend in the market which has caused the price of BTC to plummet, increased the cost of electricity, as well as its lawsuits against bankrupt Celsius Network amongst other things.
Before now, Core Scientific was already having a good year in terms of its BTC output. In June, the company sold 7,202 Bitcoins during June with an average price of around $23,000 per BTC. Next up in July, there was a 10% growth in the production of bitcoin. The bitcoin miner regarded August as a successful month for selling 1,125 BTC for almost $25.9 million.
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