The Core Scientific Inc (NASDAQ: CORZ) stock price rallied 52% after its existing creditor B. Riley offered it a $72 million loan to continue funding its operations and avoid bankruptcy.
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Like many other cryptocurrency miners, Core Scientific has found itself on the brink of insolvency after Bitcoin prices fell over 61% this year and kept trading at depressed prices as the crypto winter continues.
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Core Scientific already owed B. Riley $42 million and was about to default on its debt obligations if the diversified financial services platform had not stepped out and offered it a financial lifeline.
In a letter released to the public, B. Riley said: “Bankruptcy is not the answer and would be a disservice to the company's investors. It will destroy value for the company's shareholders, reduce potential recoveries for the company's lenders, deplete its limited resources and create massive uncertainty for all its stakeholders.
“Moreover, bankruptcy is not necessary at all. In our opinion, the vast majority of Core Scientific's issues are self-imposed and can be corrected in conjunction with an open, transparent discussion and ongoing participation with its creditors and equity holders.”
Like most Bitcoin miners, Core Scientific held all the Bitcoin mined on its balance sheet and did not sell it, expecting prices to keep rising forever. Instead, the company kept investing in expanding its mining facility, buying more Bitcoin miners and building out its power facilities.
Very few people expected Bitcoin to crash as it did this year, and most Bitcoin hodlers were caught unprepared when bitcoin prices crashed and remained depressed for months. The crypto winter has shown that Bitcoin is not an uncorrelated asset as many thought before the current crypto winter.
B. Riley has offered to immediately give Core Scientific the first tranche of $40 million without contingencies. The remaining $32 million will be available if the Bitcoin miner suspends all payments to equipment lenders while Bitcoin prices are below $18,500.
Investors reacted positively to the news, as evidenced by the rally in CORZ stock. Over 15.63 million CORZ shares had changed hands at writing.
*This is not investment advice.
Core scientific (CORZ) stock price.
The Core Scientific (CORZ) stock price rallied 52% to trade at $0.38, rising from Wednesday’s closing price of $0.25.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
