On the edge of the abyss – The financial situation of Bitcoin miners is one of the industry’s biggest concerns as the bear market has dragged on for over a year. Upside mismanagement and downside mismanagement put many miners in an embarrassing position. This is the case of Core Scientific, based in Seattle. Indeed, the company specializing in bitcoin infrastructure has announced a lack of cash in its treasury for the year 2023, the latter already showing delicate accounts in November.
Bitcoin mining: -97% for Core Scientific stock
Listed on Nasdaq since 2021, the company has just experienced a annus horibilis for its second year on the stock market, with a sad performance of -97% since January 1, 2022. Galloping inflation, poor management at the end of the bull cycle (taking profits, it’s complicated for everyone!), rising energy bills: all elements that explain the posture of the CORZ share .
One of Core Scientific’s financial partners is ready to put its hand in its pocket to avoid the worst. The bottom B.Rileywhich has already granted $42 million loan to the miner, offers a new lifeline.
In a press release published on December 14, B Riley takes stock of the situation and reveals his plan, because the situation is critical. We learn that:
“The company also said it was exploring strategic alternatives with respect to its capital structure and suggested that all options, including bankruptcy, were on the table.”
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Next mission for BTC miners: avoid bankruptcy
Core Scientific’s creditor points the finger at the mismanagement of her partner, but does not seek to throw the baby out with the bathwater. The miner had set up:
“An aggressive and ill-conceived strategy […] to continue building power plants and developing miners without ever selling Bitcoin at hand and never hedging prices.”
The inaction after the first price falls led to a delayed, but above all costly reaction. Thereby, Core Scientific had to sell 9,618 BTC last April, realizing a loss in the process.
Fund B Riley having put balls in the mining company, he wants to avoid bankruptcy. Even to the point of immediately reinjecting cash into it. The total envelope includes
$72 millionof which 40 million, liquids and available immediately.
“Our proposal is simple. Provide enough cash to avoid bankruptcy. B. Riley’s proposal does not purport to reduce amounts owed to Company equipment lenders [Core Scientific]. B. Riley is ready to fund the first $40 million immediately.”
B. Riley’s communication seems to brighten the horizon for Core Scientific. Thus, the share price jumped from 263% between Wednesday December 14 and Thursday December 15, before losing 40% the next day, bringing the quotation to $0.23 at the close on Friday. While providing liquidity is a good start, a evolution of the miner’s strategy is to be considered in order to continue, or even, to end the year 2023 without going out of business.
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