Nasdaq-listed Core Scientific is on the verge of insolvency due to the declining price of Bitcoin and litigation with Celsius Network.
In an SEC filing on Oct. 26, the company said that its operating performance and liquidity have been “severely impacted” by the prolonged decrease in the price of Bitcoin, coupled with a rise in the network hash rate and electricity costs.
The company also named litigation with Celsius Networks LLC and its affiliates as a factor contributing to its financial distress. In a court filing last week, Core Scientific said that Celsius refused to pay a total of $2.1 million owed to cover post-petition increase in electricity charges.
“Core has suffered, and is suffering, serious losses from Celsius’s refusal to honor the Agreement. These losses call into question Core’s own ability to continue as a going concern,” stated the court filing.
In its own 8-K filing, Core said it has been taking active steps to decrease monthly cost and delay expenses.
“It is very difficult to estimate our future liquidity requirements. The Company anticipates that existing cash resources will be depleted by the end of 2022 or sooner,” said Core Scientific.
The firm said that holders of their common stock could suffer a total loss on their investment in the event of bankruptcy proceedings or insolvency. Core’s share price declined 78% on Thursday.
Core has also sold a large amount of their Bitcoin holdings in the last few months. At the time of writing, the company held 24 BTC – a significant decline from the 1,051 BTC it held at the end of September.