tl;dr
Two Seas Capital, Core Scientific’s largest active shareholder with a 6.3% stake, is opposing the company’s proposed $9 billion all-stock sale to AI infrastructure provider CoreWeave. The hedge fund argues the deal undervalues Core Scientific and exposes shareholders to risk due to the volatile, unc...
Core Scientific’s largest active shareholder, Two Seas Capital, is moving to block the miner’s proposed $9 billion all-stock sale to AI infrastructure provider CoreWeave. Two Seas Capital criticizes the deal as “inadequate” and unfavorable to existing shareholders, arguing that it undervalues the company and exposes shareholders to significant economic risk.
The hedge fund, holding about a 6.3% stake in Core Scientific, expressed disappointment over the sale’s valuation and the all-stock, uncollared structure, which leaves shareholders vulnerable to CoreWeave’s volatile shares without value protection. Two Seas Capital contends that the $9 billion agreement unfairly benefits CoreWeave at the expense of Core Scientific shareholders, citing a 30% drop in Core Scientific’s stock price following the announcement as evidence of investor concern.
Under the proposed deal, each Core Scientific share is exchanged for 0.1235 CoreWeave shares, initially valuing Core Scientific shares at approximately $20.4. However, CoreWeave’s stock tumbled between 26% and 30%, slashing the effective valuation to just over $13 per share. Meanwhile, Core Scientific shares slightly rebounded, rising 1.7% to $14.35 in intraday trading.
Investor scrutiny of the deal’s terms has intensified, especially given patterns seen in other contested all-stock mergers. Jeffrey Emanuel, CEO of blockchain infrastructure firm Pastel Network, highlights that large shareholders, particularly those converting distressed debt into equity, often take an activist stance to protect their interests. Such investors typically demand more cash consideration, less volatile securities, or a more favorable merger ratio.
However, Emanuel notes CoreWeave is unlikely to amend the deal, as it benefits from using its inflated stock as currency. The core issue remains the “wildly inflated valuation” of CoreWeave's stock, with an upcoming IPO lockup expiration expected to pressure the share price further. A shareholder vote on the transaction is scheduled for later this year, a factor that may increase volatility in the shares of both Core Scientific and CoreWeave.