Investment firm, Two Seas Capital, intervenes to halt $9 billion merger with CoreWeave, citing concerns about the deal's valuation.
In a recent development, Two Seas Capital, the largest active shareholder of Core Scientific, has publicly opposed the company's proposed $9 billion all-stock sale to CoreWeave. This announcement sets up a potential battle ahead of the shareholder vote.
Two Seas Capital has voiced several concerns about the deal, arguing that it is structurally flawed, undervalues Core Scientific, and disproportionately benefits CoreWeave. The key issue lies in the all-stock, uncollared transaction structure, which exposes Core Scientific shareholders to significant economic risk due to CoreWeave's share price volatility without protections.
The firm believes that Core Scientific's scale, low-cost power access, and position in the high-performance computing market are not being properly valued in the proposed deal. They contend that any deal should reflect not just the company's assets but also the merger synergies CoreWeave has already recognised.
Two Seas Capital, which has been invested in Core Scientific since 2022 and holds more than 19 million shares, representing around 6.3% of the company's stock, has detailed its reasons for opposing the proposed terms in an open letter to Core Scientific shareholders.
The opposition from Core Scientific's largest active shareholder has thrown fresh uncertainty over the $9 billion agreement. Two Seas Capital supports the concept of merging with CoreWeave but cannot endorse the deal in its current form. They urge Core Scientific's board to seek improved terms from CoreWeave or any other interested bidder.
The transaction, announced on July 7, offers Core Scientific shareholders only CoreWeave stock in exchange for their shares. The firm pointed to a 30% drop in Core Scientific's stock following the announcement as evidence of market concern.
Founder and Chief Investment Officer Sina Toussi said further valuation details will be shared soon. The priority, according to Two Seas, should be a price that matches the strategic value of the business. Unless the proposal changes, Two Seas plans to encourage other shareholders to vote against it.
However, the demand for high-performance computing continues to rise, but Two Seas Capital sees no pressing need to sell Core Scientific. They believe that the company's strategic position in the high-performance computing infrastructure market is undervalued in the proposed deal.
This battle between Two Seas Capital and Core Scientific's board could shape the future of the company and its potential merger with CoreWeave. Shareholders will closely watch the developments as the vote approaches.
- Given the concerns expressed by Two Seas Capital, they are urging Core Scientific's board to renegotiate the proposed terms of the $9 billion all-stock sale to CoreWeave, as they believe the deal undervalues Core Scientific and disregards its strategic position in the high-performance computing market.
- While Two Seas Capital supports the concept of merging with CoreWeave, they have voiced opposition to the current deal, arguing that the all-stock, uncollared transaction structure exposes Core Scientific shareholders to significant economic risk and fails to reflect the company's assets and merger synergies.
