Institutional Shareholder Services (ISS) on Monday advised Core Scientific investors to vote against Coreweave’s $9 billion acquisition of Core Scientific, saying the company’s investors are exposed to Coreweave’s price fluctuations and the risks have already materialized.
The total offering price fell as the trading floor put pressure on Coreweave shares.
And Trip Miller, head of Gullane Capital in Memphis, added his voice. Although his company owns $200 million of Core Scientific stock, making it the third-largest holder behind Vanguard and BlackRock, he said he could not support the deal.
“Based on today’s agreement, I would have to vote no,” Miller said. He said the merger was a “flawed structure” that valued the company’s stock below its current market price.
Investors seem to agree. Core Scientific’s stock rose more than 5% in post-market trading to close at $18.81 after ISS sought to reject the deal, but the conversion transaction values the stock at a 10% discount to just $17, proving the market supports independence.
CoreWeave’s rapid expansion has led to a significant increase in debt
Since its IPO in March, CoreWeave’s market capitalization has soared to $70 billion, tripling in a matter of months as it races to dominate the AI infrastructure scene.
The company has big deals with OpenAI, Microsoft, Meta, and Nvidia, all of which rely on huge computing power. However, behind the success was aggressive business expansion through the use of large amounts of debt.
CEO Michael Intrater said during the company’s second-quarter earnings call that customer demand is so high that the company needs to build data centers “on a global scale.” He said CoreWeave is “aggressively expanding its footprint” to meet orders.
The company reported sales of $1.2 billion, more than double the same period last year, and outstanding sales of $30.1 billion, also double the amount from the beginning of the year. However, operating margins fell from 20% to 2%, showing how costs are squeezing profits.
The company also said its debt hit $11.2 billion by the end of the second quarter, up 40% from January, with borrowing costs ranging from 7% to 15%. Currently operating 470 MW>Sign up with Bybit and start trading with a welcome gift of $30,050