Core Scientific (CORZ) will not make debt payments due in October and November, according to a new securities filing. Shares of the bitcoin mining company were down as much as 76% on Thursday morning.
Core said it's exploring alternatives to its capital structure and is working with financial and legal advisers but noted that it might have to file for bankruptcy. — in which case common stock holders would completely lose their investments.
“Given the uncertainty regarding the Company’s financial condition, substantial doubt exists about the Company’s ability to continue,” Core stated in the filing with the Securities and Exchange Commission
Bitcoin mining companies such as Core often take on debt to remain competitive in a business with heavy capital expenditures in the form of mining equipment, facilities, and electricity costs. These companies have become cash-strapped due to rising costs of electricity and plummeting cryptocurrency prices.
"I've been hearing a lot of bad things about bitcoin miners who are more susceptible to rising energy costs and have a lot of debt. Core Scientific is both of those," says Chris Brendler, a senior equities analyst with D.A. Davidson. Brendler downgraded Core from "buy" to "neutral" last week.
The securities filing Thursday comes after the company accused bankrupt crypto lender Celsius Network of not paying its own bills to Core. The mining company said it's paying an additional $1.65 million to host Celsius’ mining operation, according to a motion that Core filed on Oct. 19 in bankruptcy court. The motion said the contract charges Celsius a flat rate that doesn’t account for spikes in the costs of crypto mining.
Earlier this month in a reply to Core Scientific's initial complaint in the Celsius bankruptcy case, Celsius' legal counsel said Core Scientific is running 10,885 bitcoin mining machines for the embattled firm.
Shutting those machines off would cut millions in revenue Celsius has been using to pay for its bankruptcy proceedings, a cash flow report from Celsius' legal counsel shows.
Core is asking the court to force Celsius to either pay its bills or terminate their contract. The court overseeing the Celsius bankruptcy will address the matter in a hearing in November.
Since reaching its peak a year ago, Core stock has fallen more than 97%.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers