The stock of Core Scientific, a bitcoin mining firm, has risen nearly 200% in the last four days, following a positive response to a Dec. 14 financing proposal from a current creditor hoping the company can avoid bankruptcy.
Shares of the beleaguered miner were worth just over 13 cents on December 12 before surging to nearly 40 cents as the market closed on December 15 — a 198% gain.
According to financial media firm Marketbeat, traders purchased 6,572 call options on December 15, 136% more than the average volume of 2,780, indicating that many investors are bullish on the stock and believe the price will rise further.
Some Bitcoin community members purchased shares in the hopes of making a large profit if the financing plan goes through and the company survives the bear market.
The rally could be the start of a new trend, or it could simply be a dead cat bounce. Core Scientific has had a string of bad news throughout 2022, and despite recent gains, the stock is still 95% lower than it was at the beginning of the year.
On December 14, financial services platform B. Riley sent a letter to Core’s shareholders and lenders outlining a $72 million financing plan that it believes will keep the miner from filing for Chapter 11 bankruptcy.
If the deal is approved, the first $40 million would be funded “immediately, with zero contingencies,” while the remaining funds would be issued if Core agrees to suspend payments to equipment lenders until Bitcoin’s price returns to $18,500 — a price the leading cryptocurrency has been below since Nov. 9.
Riley claims that the funding will provide Core with two years of operating cash and that their analyst expects the miner to generate annual earnings of around $165 million at a Bitcoin price of $18,000, with an additional $20 million for each $1,000 price increase.
Core was hard hit by the broader market downturn and filed a report on Oct. 26 citing a low BTC price, high electricity rates, and a refusal to repay a $2.1 million loan from bankrupt crypto lender Celsius as reasons why it might default on some of its debts.
On Nov. 22, the miner admitted in a quarterly report that its cash reserves could be depleted by the end of 2022 and that it did not believe it would be able to raise funds through financing or capital markets, given current market conditions.