Core Scientific’s stock drops 10% following plan to issue $350 million in debt

Core Scientific, a publicly-traded bitcoin mining company that posted a second-quarter net loss above $800 million last week, announced Tuesday intentions to offer up to $350 million in convertible senior notes that would expire in 2029. The firm’s stock, which trades under the ticker CORZ, is down over 10% on the day after the potential debt raise was floated.

The notes would be issued in a private offering to qualified institutional buyers and could come with a stipulation for purchasers to buy an additional $52.5 million notes. Investors can choose to hold the senior, unsecured debt until maturity or convert it into shares. Interest will be paid out semi-annually.

“Core Scientific intends to use the net proceeds from the offering to repay in full the outstanding loans under its credit and guaranty agreement entered into on January 23, 2024 and redeem all of its outstanding senior secured notes due 2028,” the company wrote in a statement, adding remaining funds for “general corporate purposes” including potential acquisitions.

In January, a bankruptcy court approved Core Scientific's Chapter 11 restructuring plan that allowed it to jettison $400 million in debt and continue operating. The firm, which had initially filed for bankruptcy protection in December 2022 following a massive dip in crypto prices and the failure of business partner Celsius, had been buoyed by the rebound in the price of bitcoin.

As part of the restructuring deal Core Scientific issued to debt holders two tranches of warrants as well as contingent value rights, which were revalued during the second quarter in a non-cash mark-to-market adjustment due to its rising stock price and accounted for a significant chunk of its on-paper net losses.

The firm has emerged from bankruptcy in a relatively strong position, having mined $1.4 billion worth of bitcoin in 2023 and expanding its footprint to become one of the largest, if not the largest, U.S. mining firms. Core Scientific has also moved further into other data center services, like high-performance computing for AI firms like CoreWeave.

However, it seems the announcement to issue convertible notes after cutting its debt by 60% since the start of the year has spooked investors who may already be wary of the post-Bitcoin halving environment.