Core Scientific Upholds Partnership With CoreWeave After Rejecting $1 Billion Buyout Offer

Core Scientific Upholds Partnership With CoreWeave After Rejecting $1 Billion Buyout Offer

By: Eliza Bennet

Core Scientific (NASDAQ: CORZ) has rejected a $1 billion buyout offer from CoreWeave, deeming the proposal significantly undervalued and not serving the best interests of its shareholders. CoreWeave had offered $5.75 per share, but Core Scientific stated that the proposal did not reflect its growth prospects and long-term value-creation potential. This rejection comes shortly after Core Scientific and CoreWeave signed a series of 12-year contracts, where Core Scientific will provide 200 megawatts of infrastructure for CoreWeave’s high-performance computing (HPC) AI services.

The board of Core Scientific, in consultation with independent financial and legal advisors, concluded that the offer was not in line with the company's future potential. Core Scientific plans to proceed with the previously announced contracts which are expected to generate over $3.5 billion in cumulative revenue. This strategic partnership marks a significant shift for Core Scientific, historically focused on Bitcoin mining, now diversifying into the AI data center space.

Following the partnership announcement, Core Scientific’s shares rose from around $4.84 to approximately $7.15. The offer from CoreWeave, although above the pre-partnership share price, falls short of the current valuation, reflecting the board’s belief in the company’s enhanced value due to the new deal.

CoreWeave is set to fund all capital investments needed for the required infrastructure modifications, estimated at $300 million, which will be credited against hosting payments until fully repaid. The partnership is anticipated to generate an average annual revenue of about $290 million, significantly bolstering Core Scientific’s earnings and enhancing shareholder value.

Core Scientific’s decision to reject the buyout offer underscores its confidence in its Bitcoin mining operations and the strategic benefits of the CoreWeave partnership. CEO Adam Sullivan emphasized the ongoing high demand for high-power sites, suggesting Core Scientific is well-positioned to meet customer needs more efficiently than greenfield data center projects. The partnership enables Core Scientific to balance its portfolio between Bitcoin mining and alternative compute hosting, maximizing cash flow and minimizing risk while maintaining significant exposure to Bitcoin's potential upside.

This strategic pivot towards AI infrastructure coincides with recent market shifts, such as the Bitcoin halving event, which reduced miner rewards and pressured mining firms to seek alternative revenue streams. Following a 13-month bankruptcy restructuring, Core Scientific has experienced a financial recovery, buoyed by an increase in Bitcoin prices and hash rates. The company's shares, which resumed trading on Nasdaq in January, have seen substantial gains, reflecting investor confidence in its strategic direction.

Core Scientific and CoreWeave's partnership builds on a long-standing collaboration dating back to 2019. Earlier in the year, Core Scientific delivered 16 MW of HPC hosting capacity to CoreWeave ahead of schedule at its new Austin data center. This ongoing partnership highlights the strategic importance of AI and cloud computing in Core Scientific’s future growth plans.

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