Core Scientific Shareholder Seeks to Block CoreWeave’s Takeover Bid
A major shareholder of Core Scientific has voiced his intention to oppose the proposed acquisition by rival data center firm CoreWeave. Trip Miller, founder of Gullane Capital, indicated that he would vote against the deal at the upcoming shareholders’ meeting, citing unfavorable terms. Gullane Capital, based in Memphis, Tennessee, is the third-largest shareholder in Core Scientific, holding approximately $200 million in shares.
CoreWeave’s Takeover Bid
The planned $5 billion takeover by CoreWeave aims to enhance its computing capabilities amidst rising operational costs. However, fluctuating stock prices have raised concerns about whether the offer adequately values Core Scientific. As investors prepare for a vote on October 30, the deal faces increasing scrutiny.
Shareholder Concerns
- Trip Miller opposes the deal, stating it undervalues Core Scientific.
- CoreWeave’s stock has dipped, affecting the attractiveness of the offer.
- Another investor, Two Seas Capital, which owns 6.3% of Core Scientific, also published criticisms, urging a rejection of the deal.
CoreWeave’s Position
Michael Intrator, CEO of CoreWeave, describes the acquisition as essential for Core Scientific’s long-term prospects. He argues it would allow for increased value creation and argues against the negative assertions made by Two Seas Capital. In a letter dated October 16, Intrator called the current offer the best and final one for Core Scientific shareholders.
Financial Dynamics
Originally, the acquisition was valued at $9 billion, with shares priced at $20.40, a significant premium over recent trading levels. However, the dynamics shifted as CoreWeave’s shares declined and Core Scientific’s shares appreciated, leading to a current valuation of around $17 per share. This approximation puts it more than 10% below its market price of about $19.
Rapid Growth and Financial Pressure
CoreWeave has rapidly expanded since its IPO, boasting a market capitalization of $70 billion. However, its operating margins have decreased drastically from 20% to 2%, while its debt surged to $11.2 billion. Analysts express caution regarding CoreWeave’s high borrowing costs paired with diminishing profit margins.
Future Prospects
The success of the proposed acquisition hinges on whether shareholders believe in Core Scientific’s potential as an independent entity. Miller argues that in a thriving data center market, Core Scientific could significantly increase in value if left alone. This sentiment reflects a broader debate about the future of Core Scientific and the implications of the takeover bid.
