DA says CoreWeave disclosure shows no returns for shareholders

DA Davidson says CoreWeave (CRWV) disclosed a pro forma contract financing structure example to analysts yesterday, trying to indicate shareholders will get some returns during the duration of the contracts being signed. The firm believes the disclosure, even if accepted at face value, “very clearly illustrates the exact opposite point.” There is no upfront equity, and no returns to current equity holders during the contract, the analyst tells investors in a research note. The company uses an assumption of 15% equity, or 85% loan-to-value, while glossing over the fact that it does not have equity capital to invest, the firm contends. DA says that if it accounted for the 9.5% rate CoreWeave is borrowing from vendors, lines of credit and unsecured notes, the company would need to service an additional $590M to service the contract, “literally wiping out any cash they are claiming to generate for shareholders.” The illustrative interest rate indicates all of the company’s previous deals are likely unprofitable, according to DA. The firm says the disclosure reinforces its Underperform rating on CoreWeave with a $36 price target The stock in premarket trading is down 1% to $160.01.