What's a $1.8 million private jet bill between Spac friends?

Two of the wildest bubbles in recent years have been Spacs and Crypto. If you want to marvel in awe at what happens when the two collide, take a look at the table below.

Bitcoin miner Core Scientific went public last year through a special purpose vehicle backed by BlackRock at a valuation of $4.3 billion. The company is now essentially a pink sheet stock with a market cap of $55 million, or less than a beeple.

It has achieved the remarkable feat of making Chamath Palihapitiya's Spac empire look good. Not exactly the career ending that CEO Mike Levitt — a former CEO of Kayne Anderson and vice chairman and partner at Apollo — would have liked.

But if you assumed that the crypto winter might have affected the lifestyles of Bitcoin barons, think again! Core Scientific spent $1.8 million on private jets for Levitt and his colleagues in the first nine months of 2022 - three times more than it spent in 2021, before it went public.

The company did not respond to requests for comment sent to its media email address. We will update as soon as we receive a response.

The biggest problems facing Bitcoin miners like Core Scientific and Riot Blockchain are obvious: input costs (energy) have skyrocketed and output prices (Bitcoin) have puked. But Core Scientific looks like an exceptionally weak member of a sickly herd, which makes his love of private jets seem a little strange.

Last month it warned it could go bankrupt by the end of the year and have to skip some debt payments. Earlier this week, the (unaudited!) third quarter results were released late, which didn't make this any less likely.

The headlines are that the Bitcoin miner lost another $434 million in the third quarter, increasing its net loss in 2022 to over $1.7 billion. Meanwhile, Core Scientific's debt has risen to about $1 billion and its cash reserves have fallen to under $30 million (although it appears that the liquidation of most of its remaining Bitcoin inventory boosted its cash balance to $32.2 million in late October).

A look at the fine print on Tuesday's earnings release only makes matters worse. Core Scientific said it "does not believe it was in default under any of its debt agreements as of September 30, 2022," but disclosed that two customers have now initiated legal proceedings this month (its private jet provider still appears to be getting paid). although).

In November 2022, Sphere 3D Corp. filed. filed a demand for arbitration with JAMS alleging the existence and breach of a hosting services agreement. The arbitration complaint alleges that the company failed to perform the services contracted for and failed to return approximately $35 million in advance payments from Sphere 3D for such services. The Company denies the allegations contained in Sphere 3D's arbitration demand and intends to vigorously defend its interests.

In November 2022, McCarthy Building Companies, Inc. filed a lawsuit against the company in the U.S. District Court for the Eastern District of Texas alleging breach of contract for failure to pay when due certain payments allegedly owed under a construction contract entered into between the parties.

In addition to Bitcoin mining, equipment sales and hosting contracts were an important part of Core Scientific's revenue. But "related parties" have become increasingly important to Core Scientific, accounting for nearly half of its equipment sales and hosting revenue in the third quarter and nearly a quarter of all revenue for the three months.

That's probably helpful because one of its largest customers was Celsius, which itself has already gone bankrupt, leaving Core Scientific looking a little exposed to a small number of customers.

Honestly, if Core Scientific made it to Christmas we'd be amazed. However, we doubt that the Spac insiders will fly commercially after this. Refinitiv data shows Levitt sold 12.6 million of its shares in the third quarter.