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Here’s What You Missed in Crypto This Week
The Fly

Here’s What You Missed in Crypto This Week

Bitcoin miner Core Scientific files for Chapter 11 as Greenidge warns of bankruptcy

As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week’s top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.

CORE SCIENTIFIC FILES FOR CHAPTER 11 BANKRUPTCY: Core Scientific (CORZ) announced Wednesday that, after a comprehensive review of potential alternatives and exhaustive discussions with various company stakeholders, the company expects to enter into a restructuring support agreement with the Ad Hoc Noteholder Group, representing more than 50% of the holders of its convertible notes. To implement the comprehensive restructuring transaction contemplated by the agreement, the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas.

Core Scientific said, “The company plans to move swiftly through the restructuring process. During this process and upon emergence, the company will continue to operate its existing self-mining and hosting operations, which remain significantly cash flow positive on a debt-free basis. The company is committed to operating normally during the implementation of its restructuring. The company remains dedicated to providing hosting services and self-mining in its state-of-the-art data centers.”

In connection with the agreement, the Ad Hoc Noteholder Group has agreed to provide commitments for a debtor-in-possession facility of up to $56M and has agreed to support the syndication of up to an additional $19M in new money DIP Facility loans to all holders of convertible notes.  These funds, along with ongoing cash generated from operations, are anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors. The agreement will be subject to a "fiduciary out" for the company to pursue better alternatives. As contemplated, the restructuring will reduce the Company’s funded indebtedness by hundreds of millions of dollars and reduce annual interest expense by tens of millions of dollars. Pursuant to the contemplated agreement, the company’s existing convertible noteholders will equitize their debt into a significant majority of the common stock of the reorganized company.

GREENIDGE IN DISCUSSIONS ON POTENTIAL BANKRUPTCY: Greenidge Generation (GREE) provided a Tuesday update on proposed steps towards restructuring a significant portion of its debt with NYDIG. On December 19, Greenidge entered into a non-binding term sheet with NYDIG to potentially restructure its approximately $74M of debt remaining with NYDIG under the Master Equipment Finance Agreements dated as of May 25, 2021 and March 21, 2022. Under the sheet, it is contemplated that Greenidge would reduce its debt by approximately $57M to $68M in exchange for a substantial number of its miners, transfer credits and coupons that have accrued to Greenidge under its non-fixed price purchase contracts with Bitmain Technologies and transfer Greenidge’s acquired mining infrastructure awaiting deployment at potential mining sites within three months following the completion of debt restructuring and hosting agreements. Pursuant to the sheet, Greenidge would provide additional collateral on its remaining mining-related assets, infrastructure assets, equity of its subsidiaries and certain cash balances to secure the remaining debt balance with NYDIG, which may have a balance of between $6M to $17M based on satisfactory transfer of assets to NYDIG and completion of the Post-Closing Covenant. In the event of a default, NYDIG will have the right to foreclose or take other legal action against Greenidge and such collateral. Under the agreement, Greenidge and NYDIG would concurrently enter into a long-term hosting agreement, whereby Greenidge would provide hosting services for up to 74 Megawatts of energy capacity, as well as an additional approximate 39 MW upon satisfactory completion of the post-closing covenant. The terms of such arrangement would require NYDIG to pay a hosting fee that would cover the cost of power and direct costs associated with management of the mining facilities, as well as a profit-sharing arrangement of gross profits.

Greenidge also reported cash and cash equivalents and restricted cash as of November 30 amounted to approximately $22M.  This represents an average monthly cash burn rate of approximately $8M during October and November 2022, of which approximately $5.5M per month was associated with principal and interest payments to NYDIG. Further, the company expects to use a similar amount of cash during the month of December, dependent on timing of payments.

The company said, “It is very difficult to estimate liquidity requirements and future cash burn rates; however, the company’s current cash burn rates are not sustainable. In the absence of additional liquidity, the company is at risk of having insufficient cash to support ongoing business operations within the next two months…Greenidge’s board of directors has engaged in active discussions about the potential for a voluntary bankruptcy filing in the event that: Greenidge determines that potential sources of liquidity will not be available to it;  Greenidge’s remaining available capital does not allow it to meet its obligations as they become due; or Greenidge defaults on any of its material contracts or indebtedness. In the event the Company determines that its potential sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, it will need to change course and pursue an in-court restructuring of its liabilities.”

COINBASE PRICE TARGETS LOWERED: On Monday, Piper Sandler analyst Richard Repetto lowered the firm’s price target on Coinbase (COIN) to $75 from $100 and kept an Overweight rating on the shares. The analyst said that while volume and volatility are "generally friendly" Q4 to-date for the eFinance sector, regulation and the macro environment impacts "also influence" the outlook for stocks.

Meanwhile on Monday, Barclays analyst Benjamin Budish lowered the firm’s price target on Coinbase to $37 from $44 and kept an Equal Weight rating on the shares. Barclays’ house view calls for a likely recession in 2023, and it will be a more challenging year across U.S. brokers, asset managers and exchanges, Budish said. Rising rates may put some pressure on private equity returns and broader volatility is likely to continue to impact transaction levels, but absent a more material deterioration in credit, private credit across the space should continue to perform well for alternatives asset managers, said the analyst. For brokers, he thinks a more challenging macro environment should be a headwind to new account growth and trading activity going into 2023. And for crypto, Budish thinks it may still be some time before more practical and potentially disruptive use cases emerge more meaningfully. Increased regulation could be a positive catalyst, "though we caution that even with the passage of a bill next year, it could still take 12+ months before new rules are scripted and implemented," the analyst wrote.

CLEANSPARK HASHRATE REACHES 6 EH/S: CleanSpark (CLSK) announced Wednesday its bitcoin mining hashrate has reached 6 EH/s, a three-fold increase in just one year.

"As we said on our earnings call last week, we expected to hit 6 EH/s before year’s end and today we are pleased to announce that we have," said CEO Zach Bradford. "This achievement is in part due to some of the machines that we were hosting for Mawson being moved out earlier than anticipated. Of course, that only tells a portion of the story. The real achievement here is the tremendous work being done by our operational teams who continue to rack machines even in Georgia’s currently frigid temperatures.”

The company is projecting to hit 16 EH/s by the end of 2023.  

SIGNATURE BANK PRICE TARGET LOWERED: Deutsche Bank analyst Bernard von-Gizycki lowered the firm’s price target on Signature Bank (SBNY) on Wednesday to $137 from $205 and kept a Buy rating on the shares. The shares are down 65% year-to-date due to a combination of negative crypto related deposit outflows, slower interest earning asset growth and negative sentiment around crypto currencies, von-Gizycki said. Signature has decided to reduce its overall concentration in its crypto related deposit portfolio, the analyst noted, adding this will lead to a reduction in earnings in the near term, but over time will likely be viewed positively as crypto related funding won’t be such an outsized concentration.

CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Ideanomics (IDEX), Riot Blockchain (RIOT), Overstock (OSTK), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.

PRICE ACTION: As of time of writing, bitcoin dropped roughly 2% this week to $16,776 in U.S. dollars, according to TradeBlock.

Keywords: bitcoin, ethereum, dogecoin, litecoin, crypto, cryptocurrency, cryptocurrencies, token, stocks, blockchain, stablecoin, regulation

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