Bitmain’s S19XP Sales Transform into 5.5% Stake in Core Scientific

The latest addition to Bitmain's interest in proprietary bitcoin mining

Bitmain, the world’s largest manufacturer of bitcoin miners, has become a material shareholder of Core Scientific with a 5.5% stake following the bitcoin mining giant’s Chapter 11 emergence.

Bitmain submitted a filing with the SEC on Friday, detailing that it owns 10.7 million shares of Core Scientific as part of an equipment sales transaction approved by Core’s bankruptcy court. That represents a 5.5% beneficial ownership of Core Scientific, which was not previously reported.

The 5.5% stake in Core Scientific adds to Bitmain’s interest in proprietary bitcoin mining, competing against mining companies that are also buyers of its mining hardware. Core Scientific operates one of the largest bitcoin mining fleets globally, with more than 20 EH/s split between proprietary and colocated hashrate.

As previously reported, Bitmain also owns a 5% stake in BitFuFu while being a material supplier of leased miners for BitFuFu’s proprietary mining and cloud mining businesses totaling 15 EH/s as of June. 30.

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For the first half of 2023, BitFuFu and Core Scientific booked nearly $385 million in combined revenue from proprietary bitcoin mining, hosting, and cloud mining.

Core entered into a purchase agreement for 4.1 EHs of S19XP bitcoin miners from Bitmain in 2023 while going through the Chapter 11 reorganization proceeding. The transaction was worth $77 million, consisting of $23.1 million in cash payments and $53.9 million in equity payments.

Core’s purchase agreement and a separate colocation agreement with Bitmain were approved in January, allowing it to issue 10.7 million shares to Bitmain within five days after its bankruptcy reorganization plan was effective. That implied Bitmain’s entry price was about $5 per share.

Core successfully emerged from Chapter 11 on Jan. 23 and relisted on the Nasdaq exchange the next day with 185 million shares of common stocks. Bitmain’s ownership hence is material enough to file an SC 13G form, which is required for a person or institution that beneficially owns more than 5% of a public security.

However, the worth of Bitmain’s stake in Core Scientific has declined sharply over the past weeks as Core’s share price closed at $2.96 as of Friday, down 40% since its relisting.