Bankrupt Cryptocurrency Miner Experiences Unexpected Surge, Mirroring Hertz's Revival

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. This massive increase is likely due to investors betting that the company will be able to turn things around and emerge from bankruptcy successfully.

This move is similar to the one seen in Revlon Inc. earlier this year after its own Chapter 11 filing. Retail traders caused similarly confusing spikes in the stock prices of other bankrupt companies in mid-2020, including Hertz Global Holdings Inc. and JCPenney.

According to Matthew Kimmell, digital asset analyst at crypto investment firm CoinShares, seeing the list of creditors and assets could have given investors some confidence that there would be a positive future. He said that this is not an FTX situation, where the company is heavily weighted in the liability category compared to its assets.

The company's bankruptcy filings show that it has $1.4 billion in assets against $1.3 billion in liabilities, which makes it 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. This would allow the company to repay its debts and continue operating.

At around 12:40pm in New York, over 409 million shares of Core Scientific were traded, more than 2200% of its daily average over the past 3 months. However, retail investors appeared to be avoiding the frenzy, unlike with Hertz and Revlon. According to data provided by Fidelity, less than 1,000 buy orders were placed on their platform, which is markedly lower than the demand for true retail-trader favorites.

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

Core Scientific, based in Austin, Texas, is the largest Bitcoin miner by computing power and the first major public mining company to declare 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.