Two Seas Capital Questions Core Scientific’s Valuation Amid CoreWeave Buyout Proposal

• Two Seas Capital holds a 6.5% stake in Core Scientific.

• Core Scientific’s stock dropped 30% after the buyout announcement.

• CoreWeave aims to expand its data center capacity through this acquisition.

Core Scientific’s shareholders are concerned about the undervaluation in the proposed buyout by CoreWeave, urging a vote against the deal.

What is the Core Scientific Buyout Controversy?

The proposed buyout of Core Scientific by CoreWeave is facing opposition from Two Seas Capital, which argues that the $9 billion valuation significantly undervalues the company. This deal has raised concerns among shareholders about potential economic risks.

Why is Two Seas Capital Opposing the Buyout?

Two Seas Capital, the largest shareholder of Core Scientific, believes the proposed sale “materially undervalues the Company.” They argue that the deal favors CoreWeave at the expense of Core Scientific shareholders, as indicated by the 30% drop in stock price following the announcement.

Frequently Asked Questions

What are the implications of the buyout for Core Scientific shareholders?

The implications include potential undervaluation of shares and economic risks, as highlighted by Two Seas Capital’s opposition to the deal.

How has Core Scientific’s stock reacted to the buyout news?

Core Scientific’s stock rose by 3% following the shareholder letter, indicating investor support against the buyout offer.

Key Takeaways

• Shareholder Opposition: Two Seas Capital is against the buyout, citing undervaluation.
• Market Reaction: Core Scientific’s stock saw a 3% increase post-letter publication.
• Future Outlook: The acquisition could significantly impact Core Scientific’s growth trajectory.

Conclusion

The ongoing debate over Core Scientific’s buyout by CoreWeave highlights significant concerns regarding shareholder value and market perception. As the situation develops, it remains crucial for investors to stay informed about potential impacts on their investments.

• The shareholder letter by Two Seas Capital says the buyout offer undervalues Core Scientific’s business.

• Two Seas Capital, the largest active shareholder of Bitcoin mining company Core Scientific, announced its intention to vote against the buyout offer proposed by AI infrastructure company CoreWeave.

• The investment company holds a 6.5% stake in Core Scientific and said the $9 billion valuation deal, finalized in July, undervalues the business. The shareholders wrote on Thursday:

“The proposed sale materially undervalues the Company and unnecessarily exposes its shareholders to substantial economic risk. In our view, the transaction decidedly and unfairly favors CoreWeave at the expense of Core Scientific shareholders.

The fact that Core Scientific’s stock price declined by 30% in the days following the transaction announcement strongly suggests to us that other investors agree,” the letter reads.

Core Scientific stock price over a one-year period. Source: Yahoo Finance

CoreWeave has been eyeing the acquisition of Core Scientific since 2024, as investors keep an eye on both companies for signs of a closed deal.

CoreWeave leases AI data centers from Core Scientific. By acquiring Core Scientific, CoreWeave can significantly expand its data center capacity and support the growing demand for AI infrastructure.

“As the need for AI training and inference has grown, the demand for energy and HPC infrastructure has increased dramatically,” Two Seas Capital said in a statement. “Core Scientific… is uniquely positioned to meet this growing demand and has a clear runway to compound growth for many years.”

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Share prices react following the shareholder letter and prior developments

Shares of Core Scientific rose by 3% to $14.38 following the publication of the shareholder letter. CoreWeave’s stock also surged during intraday trading on Thursday, rising nearly 9% at time of writing.

CoreWeave made several offers to buy Core Scientific, including its latest $9 billion bid in July, all of which were initially rejected as too low.

Core Scientific’s stock price reacts to news of a potential offer from CoreWeave in June, followed by the correction. Source: TradingView

The deal’s progress stalled until talks between the companies were revived in June, sending Core Scientific’s stock soaring by over 23% in a single day, before retracing in July.

CoreWeave has a market capitalization of over $58.1 billion, while Core Scientific’s market cap is over $4.3 billion at the time of this writing.

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