Core Scientific is filing for Chapter 11 bankruptcy protection in Texas early Wednesday morning.Core Scientific market cap has fallen from $4.3 billion in July 2021 to $78 million as of the end of trading on Tuesday. The company’s stock has dropped more than 98% in the past year. Despite generating positive cashflow, it is not enough to repay the financing debt owed on leased mining rigs. The company plans to continue operating normally while reaching a deal with senior security noteholders, who hold the majority of the company’s debt. Core previously warned that common stock holders could potentially suffer “a total loss of their investment,” but this may not be the case if the overall industry recovers. The company also disclosed that it would not make debt payments due in late October and early November, and creditors are allowed to sue for nonpayment. The company cited decreased bitcoin prices, increased electricity costs, and an increase in the global bitcoin network hash rate as contributing factors to its financial difficulties.
Lack of proper risk management has resulted in many large miners in financial trouble during this down turn. Due to the difficulty adjustment built into the bitcoin protocol, every miner that shuts down their rigs increases profitability for remaining miners.