CoreWeave (CRWV +4.87%) has big plans to build on its capability to supply high-performance computing and artificial intelligence (AI) data center infrastructure. Those plans include acquiring Core Scientific (CORZ +6.21%) to enhance its high-performance data center infrastructure.
That transaction could be at risk, though. Investors are reacting today by punishing CoreWeave shares. The stock was lower by 11% at 1:25 p.m. ET.
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The problem with an all-stock transaction
The acquisition of Core Scientific would help CoreWeave expand its AI infrastructure and potentially increase its market share in the fast-growing sectors of AI and cryptocurrency mining. The deal has a total equity value of about $9 billion. CoreWeave structured the acquisition as an all-stock deal to help avoid piling on more debt.
CoreWeave is already spending heavily to grow its internal business. In July, CoreWeave also announced plans to invest over $6 billion to build and equip a new state-of-the-art data center in Pennsylvania.
After investors were disappointed with CoreWeave's outlook from its Aug. 12 quarterly report, shares tanked. That extended drop has slashed CoreWeave stock by nearly 40% since the earnings release.
NASDAQ: CRWV
Key Data Points
Having the deal structured as an all-stock transaction left it vulnerable to a falling share price. The implied value of the deal has dropped significantly enough that at least one large Core Scientific shareholder opposes it on its original terms.
Alternative investment management firm Two Seas Capital is Core Scientific's largest active shareholder, owning about 6.3% of the company. With CoreWeave stock continuing to drop since Two Seas publicly announced its opposition, any renegotiation could be costly for CoreWeave. It could even put the deal on ice, and investors are getting out of CoreWeave today ahead of either outcome.
