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Core Scientific Shares Surge Following Acquisition Offer by CoreWeave

Core Scientific Shares Surge Following Acquisition Offer by CoreWeave

Jun 10, 2024
Bitcoin Mining

Core Scientific Shares Surge Following Acquisition Offer by CoreWeave

Bitcoin miner Core Scientific has received a takeover bid from CoreWeave, a cloud computing provider focusing on artificial intelligence (AI). CoreWeave proposed an all-cash acquisition at $5.75 per share, a premium over Core Scientific's recent stock performance. Following this offer, shares of Core Scientific soared in early trading on Tuesday, climbing as much as 37% to $6.70, surpassing CoreWeave's bid. The offer by CoreWeave, which remains closely held, aims to enhance its AI data center capacity.

The news comes on the heels of a joint announcement made late Monday, June 4, by the two companies regarding a series of 12-year hosting contracts. Under these contracts, Core Scientific will provide about 200 megawatts of infrastructure to host CoreWeave's operations. This move aligns with Core Scientific's strategy to diversify and capitalize on the burgeoning AI sector while continuing to grow its Bitcoin mining capabilities.

CoreWeave's bid is a 55% increase over Core Scientific's three-month volume-weighted average price as of May 31. Before the offer was made public, Core Scientific's shares closed at $4.87, valuing the company at approximately $866 million.

Both companies have refrained from commenting on the acquisition offer. However, the hosting deal has emerged as a significant milestone for a Bitcoin miner, estimated to generate $3.5 billion in revenue for Core Scientific, positioning it as a major infrastructure provider in both the Bitcoin and traditional data center markets.

Core Scientific holds a prominent place among top mining companies by computing power. With 1.2 gigawatts of contracted power, the company is set to deliver nearly 500 megawatts of high-performance computing (HPC) power, potentially ranking it among the largest data center operators in the United States.

CoreWeave had recently bolstered its financial strength with $8.6 billion in funding, including a $1.1 billion preferred equity deal that valued the startup at $19.1 billion. The funding round also included $7.5 billion in debt, with contributions from notable investors such as Coatue Management, Altimeter Capital, and Fidelity Management & Research Co.

In a press release dated June 3, 2024, Core Scientific's CEO, Adam Sullivan, highlighted the transformative potential of the contracts with CoreWeave, indicating a strategic shift towards AI compute opportunities. Sullivan emphasized the company's readiness to meet the high demand for HPC hosting, noting ongoing discussions for additional contracts that could further expand Core Scientific's footprint.

The agreements point to a significant pivot for Core Scientific, promising a stable and lucrative revenue stream from its contracted, dollar-denominated services. Once operational, the 200 MW HPC infrastructure is anticipated to generate over $3.5 billion in cumulative revenue during the initial 12-year contract term, with an estimated $290 million in average annual revenue.

This development represents a major transition for Core Scientific, which has been hosting CoreWeave's GPUs since 2019. The new contracts are expected to enhance the company's gross margin, earnings power, and shareholder value. As part of its HPC hosting strategy, Core Scientific plans to relocate some of its Bitcoin mining capacity to maintain business continuity and growth.

Bloomberg Article

Core Scientific Press Release


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