Core Scientific Shareholders Urged to Reject CoreWeave Merger
Two Seas Capital LP, a prominent investment management firm and significant shareholder of Core Scientific, Inc. (NASDAQ: CORZ), has strongly supported the recommendations of independent proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis. These firms have advised Core Scientific shareholders to vote "AGAINST" the proposed sale of Core Scientific to CoreWeave, Inc. (NASDAQ: CRWV) during the upcoming special shareholder meeting.
According to Glass Lewis, the current deal with CoreWeave fails to adequately protect Core Scientific’s shareholders, as indicated by a prolonged market discount concerning the merger's implied value related to Core Scientific's stock price. The advisory firm has emphasized that shareholders are unlikely to receive fair compensation relative to the inherent risks in accepting the merger terms. They recommend rejecting the merger to allow Core Scientific to pursue its standalone potential.
Sina Toussi, Founder and Chief Investment Officer of Two Seas, stated, “The recognition from both Glass Lewis and ISS regarding the flaws in this proposed transaction is greatly appreciated. We firmly believe that Core Scientific holds significant value, particularly in the booming AI landscape, and this merger does not reflect the company's true worth.” He encouraged shareholders to vote against the acquisition on the GOLD proxy card to unlock Core Scientific's full potential.
Concerns Raised by Advisory Firms
Both ISS and Glass Lewis highlighted critical issues related to the structure and valuation of the Proposed Merger.
A Deficient Structure
- Glass Lewis noted concerns regarding the allocation of risk and value within the transaction structure. They pointed out that Core Scientific shareholders were not offered any price protection, despite evident volatility in CoreWeave’s share price.
- The lack of a price protection mechanism exposes Core Scientific shareholders to the fluctuations of CoreWeave's stock price post-announcement. The advisory firm suggests that mechanisms such as a collar or floating exchange ratio could potentially mitigate this risk.
An Inadequate Valuation
- According to the reports, the financial advisors’ valuations have been perceived as overly optimistic, primarily concerning how CoreWeave has been valued relative to its recent market activity.
- Two Seas raised valid critiques regarding the failure to assign a terminal value to the Colocation Contracted Business, indicating that such assumptions could result in underestimating Core Scientific's long-term economic contributions.
Potential for Standalone Growth
Both advisory firms concurred that Core Scientific possesses compelling standalone potential in the rapidly expanding AI and high-performance computing markets. Recent trends in AI infrastructure suggest an optimistic outlook for the company if it continues to operate independently.
Between mid-August and mid-October, the implied value of the merger consideration has consistently lagged behind Core Scientific's share prices, reinforcing investor perceptions that the company is more valuable on its own.
About Two Seas Capital LP
Founded in 2020, Two Seas Capital specializes in event-driven investment strategies backed by thorough research. With around $2 billion in assets under management, the firm focuses on identifying and capitalizing on market inefficiencies discovered through regulatory and legal events. Their expertise in due diligence allows them to decipher complex situations into viable investment opportunities.
Frequently Asked Questions
What is Two Seas Capital's position on the merger?
Two Seas Capital urges shareholders to reject the proposed merger with CoreWeave, citing inadequate compensation and valuation concerns.
Why are ISS and Glass Lewis recommending against the merger?
Both firms highlight issues with the proposed transaction's structure and valuation, indicating it does not fairly compensate Core Scientific shareholders.
What is Core Scientific's potential if the merger is rejected?
If the merger is rejected, Core Scientific could pursue its standalone growth strategy, particularly in the promising AI market.
What are the key concerns shared by advisory firms?
They express concerns over the lack of price protection for shareholders and an overall inadequate valuation of Core Scientific in the proposed deal.
How can shareholders express their vote regarding the merger?
Shareholders are encouraged to vote "AGAINST" the merger using the GOLD proxy card during the upcoming special meeting.
