Bankrupt Crypto Miner Soars in Move Reminiscent of Hertz

(Bloomberg) — Core Scientific Inc. surged by a record 273% on Thursday just a day after the Bitcoin miner became the latest cryptocurrency company to file for bankruptcy.

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It’s a move reminiscent of the one seen in Revlon Inc. earlier this year after its own Chapter 11 filing. Retail traders caused similarly confusing spikes of other bankrupt companies in mid-2020 including Hertz Global Holdings Inc. and JCPenney.

“Maybe after seeing the list of creditors and assets on hand, investors could have gained some confidence that there actually will be a positive future,” said Matthew Kimmell, digital asset analyst at crypto investment firm CoinShares. “It is not an FTX situation, where they are heavily weighted in the liability category versus assets.”

The company’s bankruptcy fillings show that it has $1.4 billion assets against about $1.3 billion liabilities and that makes the miner different from most bankrupt crypto firms. US authorities are pursuing a sprawling investigation into the collapse last month of FTX, which was once one of the world’s biggest crypto exchanges.

On Thursday, Core Scientific received permission to access a $37.5 million loan to help fund its bankruptcy. The Bitcoin miner is working on a plan to restructure its debts that would nearly wipe out existing shareholders.

Read more: Core Scientific Declares Bankruptcy as Crypto Winter Lingers (2)

Roughly 409 million Core Scientific shares changed hands by 12:40 p.m. in New York, more than 2,200% its daily average over the past three months. But, unlike with Hertz and Revlon, retail investors appeared to be avoiding the frenzy. Less than 1,000 buy orders were placed on Fidelity’s platform, according to data provided by the firm, markedly lagging demand for true retail-trader favorites.

Even with Thursday’s sudden rally, Core Scientific remains as one of the worst performing stocks in the US for 2022. After starting the year trading at roughly $11 per share, the company has watched its share price crater by nearly 99% year-to-date, trading as low as 5 cents following Wednesday’s bankruptcy announcement.

Austin, Texas-based Core Scientific is the largest Bitcoin miner by computing power and the first major public mining company that has declared bankruptcy. Bitcoin miners raised billions of dollars from debt financing during the last bull run but have struggled to repay debt due to low Bitcoin prices and power cost hikes.

–With assistance from Bailey Lipschultz and Jeremy Hill.

(Updates with details on loan approval in fifth paragraph.)

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