Bankrupt Bitcoin (BTC) mining company Core Scientific filed an emergency motion on January 25 to sell $6.6 million worth of Bitmain coupons, according to court records.
As submitted, some of the conditions applied to the coupon are not beneficial to the Scientific Core business. Specifically, the coupon can “only be used to pay 30% of new orders of S19 Miners from Bitmain, and cannot be exchanged with Bitmain for cash.”
The coupon is limited to the S19 model, which provides a lower hash rate output compared to the latest Bitmain models. “The Debtors do not believe that using their liquidity to purchase new S19 Miners, despite the availability of Bitmain Coupons, is the best use of the Debtors’ cash,” the company said.
Additionally, Bitmain’s coupons will expire between March and April 2023, when the company expects to emerge from Chapter 11 reorganization. Scientific Core also notes that it will not acquire additional S19 miners while in Chapter 11 or beyond.
Along with the move, the company has been in discussions with Bitmain and two potential third parties interested in buying coupons at a significant discount. In particular, Bitmain’s $1.9 million coupon sale for $285,000 and $4.8 million coupon sale for approximately $713,000, both representing 15% of the coupon’s face value.
The sale will bring an aggregate of nearly $1.0 million to Core Scientific’s balance sheet. The company also notes:
“Although the aggregate purchase price of approximately $1.0 million will represent a significant discount to the approximately $6.7 million face value of the Bitmain Coupon, it will also represent a significant value above what this Bitmain Coupon is worth to Debtors and Estates: zero. ”
According to the filing, the crypto season caused a flood of S19 Miners being offered for sale on the secondary market, causing prices to drop. “Thus, new transactions for S19 Miner coupons on the Coupon Exchange have occurred at values between 15% and 25% of the coupon’s face value.”
Among the largest cryptocurrency mining companies in the United States, Core Scientific filed for Chapter 11 bankruptcy on December 21 due to rising energy costs, declining profits, as well as the decline in Bitcoin prices. The company recently won court approval to access a $37.5 million loan from creditors amid liquidity problems.