Two Seas Capital Raises Concerns on Core Scientific Merger
Concerns Over the Core Scientific and CoreWeave Merger
Two Seas Capital, recognized as the largest active shareholder in Core Scientific Inc (NASDAQ: CORZ), has expressed its aim to vote against the proposed all-stock acquisition by CoreWeave (NASDAQ: CRWV). The firm highlights that the offer appears significantly undervalued and contains structural flaws that could place shareholders at undue risk.
Details of the Opposition
In a public letter, Two Seas Capital disclosed ownership of over 19.1 million shares, representing around 6.3% of Core Scientific's outstanding stock. The investment firm criticized the details of the agreement announced on July 7, particularly the all-stock structure without protection measures, which opens up shareholders to risks associated with CoreWeave's share price fluctuations.
Position on Merger Principles
While Two Seas Capital stated that it is not opposed to mergers in general and even holds a stake in CoreWeave, it emphasized that the current proposed terms excessively favor CoreWeave and do not adequately represent Core Scientific's substantial assets and capabilities. This includes its infrastructure and strategic importance in the high-performance computing (HPC) sector.
Strategic Importance of Core Scientific
Core Scientific plays a vital role in the AI infrastructure landscape. The firm highlights its advantageous low-cost power access, extensive data center expertise, and remarkable growth potential, especially viewed through the lens of increasing demand for AI-related computing technologies.
Market Reaction to the Acquisition Announcement
After the announcement of the acquisition, Core Scientific's stock experienced a notable 30% decline. Two Seas Capital interprets this drop as a signal reflecting broader market disapproval of the merger proposal. The firm intends to rally other investors urging them to oppose the transaction unless there are significant revisions regarding valuation and the deal's structure.
Future Prospects and Suggestions
While open to considering other potential buyers, including CoreWeave itself, Two Seas Capital advocates that Core Scientific’s board should negotiate a price that accurately reflects the company's long-term strategic value and the synergies achievable through a merger. This approach would ensure that shareholders receive fair compensation for their investments.
Conclusion
The voice of shareholders like Two Seas Capital is critical in shaping the future direction of companies like Core Scientific. With their insights, investors can ensure that their valuations and decisions align more closely with the companies' intrinsic values and growth trajectories.
Frequently Asked Questions
What is Two Seas Capital's main concern regarding the merger?
Two Seas Capital believes the merger proposal undervalues Core Scientific and presents risks for its shareholders.
How much of Core Scientific's stock does Two Seas Capital own?
Two Seas Capital owns over 19.1 million shares, roughly 6.3% of Core Scientific's outstanding stock.
What structural flaws does Two Seas Capital highlight in the acquisition?
The firm points out that the all-stock structure lacks protective measures, making shareholders vulnerable to price volatility from CoreWeave.
Is Two Seas Capital against mergers in general?
No, they are open to mergers but want favorable terms reflecting Core Scientific's strategic value.
What market reaction did Core Scientific's stock experience after the announcement?
Core Scientific's stock dropped by 30%, an indication of market disapproval of the merger.
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