After staying silent on the opposition it received to its proposed $9 billion acquisition of Core Scientific (CORZ) from shareholder Two Seas Capital, AI hyperscaler CoreWeave (CRWV) finally responded last week, calling the proposal its “best and final” offer.
The company released an open letter to Core Scientific’s stockholders reaffirming its deal, calling Two Seas Capital “an event-driven hedge fund specializing in litigation” that had made “inaccurate and misleading statements” about the proposed acquisition.
Two Seas filed a proxy statement at the end of September calling on stockholders to reject the transaction, claiming that the all-stock nature of the transaction was being done at an “inadequate valuation,” according to Two Seas founder and CIO Sina Toussi.
“The proposed all-stock, uncollared structure leaves Core Scientific shareholders exposed to the high volatility of CoreWeave's share price with no protections on the value they will receive at or following close,” Toussi said.
In CoreWeave’s open letter, co-founder and CEO Michael Intrator dismissed Two Sails’ argument that a stand-alone value-creation plan is superior for Core Scientific than CoreWeave’s offer.
“The combination with CoreWeave will de-risk Core Scientific’s standalone plan, which involves significant near-term capital expenditures and execution risks associated with securing power, customers and financing, which will require Core Scientific to pursue substantial debt and/or dilutive equity,” Intrator said.
He added that Two Seas is overlooking “the operational challenges and delays that Core Scientific has referenced in its public filings,” and that the acquisition will instead build “on the significant progress realized by Core Scientific and CoreWeave to date on Core Scientific’s existing sites.”
Intrator also said that Core Scientific would have access to capital that would otherwise be unavailable to it, and by vertically integrating the company’s data centers, it will give Core Scientific’s shareholders the “opportunity to participate in future value creation.”
Intrator noted that Core Scientific’s stock price increased by about 150% in the 13 months prior to the announcement because of its partnership with CoreWeave — and that CoreWeave “is paying a historically high premium of 60%.”
In a presentation emailed to reporters, Core Scientific noted that its board had unanimously approved the transaction, calling it “an attractive exchange ratio that provides meaningful upfront premium and upside opportunity to Core Scientific shareholders.”
The company pointed out that because the companies are already “closely linked” it will not only de-risk integration, but will also benefit “from combined operations.”
Core Scientific also noted that the merger with CoreWeave will eliminate standalone execution risk “on timely delivery of currently leased data centers and projected future leasing in Core Scientific’s current business plan, as well as ~$7.3 billion financing need.”
Core Scientific shareholders are set to meet on October 30 to vote on the deal.
“We encourage Core Scientific’s stockholders to think objectively about Core Scientific’s standalone prospects and the significant risks involved with executing on a standalone plan,” Intrator said in his open letter. “The proposed acquisition by CoreWeave addresses key execution risks that would otherwise be borne by Core Scientific’s stockholders.”
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