The US-based Bitcoin mining firm Core Scientific has recently sought reorganization under Chapter 11 of the US bankruptcy law. Under the plan filed in the Southern District of Texas this Wednesday, the firm has agreed to a restructuring proposal by a group of creditors that would convert their debt into a 97% ownership of the company.
If approved, this would save current shareholders from being entirely wiped out while still retaining some ownership of the company. Importantly, Core Scientific aims to eliminate its debt of hundreds of millions of dollars, significantly reducing annual interest expenses. The company stated it is “seeking to build as much consensus as possible” on its post-bankruptcy future and remains confident in the business’s revival.
However, uncertainties lie in the restructuring proposal’s approval, and the plan comes as a result of negotiations with key stakeholders, taking place six months after the firm initially filed for bankruptcy protection. The company initially attributed its bankruptcy to a $7 million unpaid debt from the now-bankrupt crypto lender Celsius Network and had suffered a net loss of $434.8 million for the three months ending September 30, 2022. Furthermore, the firm only had $4 million in liquidity at the time of filing.
Core Scientific shares witnessed a rise of more than 11% on Wednesday when the proposal was made public. This bullish momentum continued into Thursday, with the stock increasing by 12%, bolstered by overall positive sentiment in the Bitcoin market. However, the stock still remains down by 76% over the past 12 months, trading at a price of $0.51.
While the prospect of Core Scientific eliminating its debt and paving the way for a business revival might seem promising, skeptics may argue that the success of the restructuring plan is not guaranteed. Shareholders may also question the long-term benefits of their reduced ownership in the firm and the potential for further setbacks. Nonetheless, the recent surge in Core Scientific’s stock price may signal cautious optimism among investors, with many watching the outcome of these bankruptcy proceedings closely.
Source: Cryptonews
