Core Scientific says it isn’t “hopelessly insolvent”
Citing bitcoin’s price rebound and declining energy costs
Over the past week, there has been a clash of sorts between the equity and debt holders of Core Scientific. In short, they seem to have opposing opinions on whether we have bottomed.
The ad hoc group of stockholders of Core filed a motion earlier last month to form an Equity Committee so that they are better represented in Core’s ongoing Chapter 11 case. After all, they are not at the front line for claims. The group holds economic interests of 69 million common stocks. The person with the largest number of shares in the ad hoc group is Kevin Turner, the former CEO of Core and ex-COO of Microsoft.
The group’s rationale is that Core may well be solvent now as the market conditions have improved. Core itself responded later last week and supported the idea with a budget of $4.75 million, saying:
“Courts have held that an equity committee is unwarranted when a debtor is ‘hopelessly insolvent.’...Based on market factors, the Debtors do not believe they are hopelessly insolvent.”
It charted the graph below as evidence and said its energy costs have “declined steadily” since the petition date as underlying fuel costs has generally decreased—but did not provide specifics.
However, the ad hoc group of noteholders, which included debt creditors like BlackRock and Apollo, filed an objection to the motion, arguing:
“Speculation on future bitcoin pricing is not a business plan, nor does it justify the extraordinary relief sought in the Equity Committee Motion… The Equity Group should not be permitted to gamble with the creditors’ money.”
For now, the judge overseeing the case has indicated he would allow stockholders to form an official committee in the bankruptcy with conditions. Guess we will find out.
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