CoreWeave’s (CRWV) $9 billion plan to buy data center firm Core Scientific (CORZ) is running into trouble. According to The Financial Times, several major shareholders of Core Scientific have reportedly raised concerns that the deal undervalues the data center operator, potentially leaving them with a lower return. This growing pushback threatens to complicate the high-stakes acquisition and casts uncertainty over its future.
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CoreWeave-Core Scientific Merger Hits Roadblock
The merger was initially announced on July 7. Since the announcement, CRWV stock has dropped more than 30%. As a result, the value of Core Scientific in the deal has declined, reducing the expected return for its shareholders.
Meanwhile, hedge fund investors in Core Scientific are weighing the option of rejecting the merger, aiming to pressure CoreWeave into presenting a more favorable offer.
Regulatory filings show that hedge funds holding over 1% of Core Scientific stock include Two Seas Capital, Helix Partners Management, JAT Capital, and Parsifal Capital Management. Several of these investors told the Financial Times they would view the deal more favorably if it included a collar agreement, which would help protect Core Scientific shareholders by capping potential losses.
Last week, CNBC’s David Faber also reported that some investors believe the current exchange ratio undervalues their stakes and are seeking more favorable terms. According to current terms, Core Scientific shareholders are being offered a fixed exchange ratio of 0.1235 newly issued CoreWeave shares for each of their shares. If their concerns aren’t addressed, they may work to block the deal.
Is CRWV a Good Buy?
According to TipRanks, CRWV stock holds a Hold consensus rating based on 13 Holds, five Buys, and two Sells assigned over the last three months. Meanwhile, CoreWeave’s average stock price target stands at $112.88, implying an upside of 6.5% from current levels.
