Core Scientific rejects CoreWeave buyout bid after big HPC deal

Though Core Scientific was willing to ink a deal with CoreWeave, the bitcoin miner has turned down the cloud provider’s offer to buy the company.

CoreWeave and Core Scientific on Tuesday entered into various 12-year contracts whereby the bitcoin miner will offer roughly 200 megawatts (MW) of infrastructure to host CoreWeave’s high-performance computing (HPC) services.

CoreWeave followed that deal up by offering to buy all outstanding Core Scientific shares in cash for $5.75 per share.

Core Scientific’s stock price was $7.30 Thursday morning after jumping 40% on Tuesday on the back of the HPC contract.

The company’s board of directors determined the CoreWeave proposal “significantly undervalues the company and is not in the best interests of the company and its shareholders,” Core Scientific said in a Thursday press statement.

It is unclear if CoreWeave will make another offer. A spokesperson did not immediately return a request for comment.

Just getting started

The rejection comes as Core Scientific has touted the value of its infrastructure.

The Texas-based miner’s latest deal with CoreWeave proves it seeks to lock in long-term projected revenues through that business line.

But the company is just getting started, as supporting artificial intelligence (AI) applications will continue to be a key part of its strategy, CEO Adam Sullivan told Blockworks this week.

Of Core Scientific’s 1.2 gigawatts of contracted power capacity, the company can provide about 500 MW of HPC power tailored for alternative compute workloads, he noted.

Cloud provider CoreWeave is set to use about 40% of that 500 MW.

Core Scientific is in discussions with other potential clients about the remaining 300 MW or so of capacity.

“Our new HPC contracts transform and expand our hosting business and earnings power with stable, predictable, high-margin and long-term revenue that will provide balance to our bitcoin mining business and the more volatile nature of bitcoin pricing,” Sullivan said.

Modifications to the miner’s sites are set to start in the second half of 2024 and be operational in early 2025.

Core Scientific estimates the 12-year contract to drive average annual revenue of $290 million.

Capital unlock could be coming after stock soars

Investors clearly view the growth of a seemingly stable, cash-flowing business line super attractive.

Spurred by the CoreWeave deal, Core Scientific’s stock price rose roughly 40% Tuesday and went up nearly 5% on Wednesday.

The share price rally is especially significant given that the company needed shares to hit $6.81 to convert its so-called Tranche 1 warrants and unlock $670 million in cash.

That was a condition of the bitcoin miner’s reorganization plan when it emerged from bankruptcy in January. The plan reduced Core Scientific’s net debt to $571 million by converting equipment lender and convertible note holder debt to equity.

It appears Core Scientific’s stock price will need to remain at that $6.81 volume-weighted average price over 20 straight trading days, according to company filings.

A Core Scientific spokesperson did not immediately return a request for comment on the process of exercising those warrants and how the company would use the capital.

Compass Point Research and Trading analysts Chase White and Joe Flynn said in a January research note that they expected 100% of the Tranche 1 warrants to be exercised by the fourth quarter, “allowing [Core Scientific] to pay down additional debt.”

Sullivan noted the importance of hitting certain share price levels — such as the $6.81 mark — in a March interview with Blockworks.

He added at the time: “All of those things would provide us an opportunity here to really outpace our competitors in a way that everyone saw us do for multiple years as we ramped up through 2022.”

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