CoreWeave’s (CRWV) stock is sliding lower as analysts and investors assess the company’s $9 billion acquisition of data center infrastructure provider Core Scientific (CORZ).
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Artificial intelligence (AI) cloud infrastructure company CoreWeave’s share price has fallen 6% in the day since it said that it is purchasing Core Scientific in an all-stock deal. Shareholders of Core Scientific will receive 0.1235 CoreWeave shares for each share they currently hold. That implies a 66% premium to Core Scientific’s closing stock price before the deal was announced.
After the deal closes, Core Scientific shareholders will own less than 10% of the combined company. This is the second time that CoreWeave has made a bid for Core Scientific. Last year, Core Scientific rejected CoreWeave’s unsolicited takeover offer to buy all of its outstanding shares.
Benefits and Synergies?
CoreWeave says the acquisition will eliminate $10 billion in future lease obligations and significantly enhance its operating efficiency. The transaction is expected to close by year’s end, pending regulatory and shareholder approval.
The deal also expands CoreWeave’s access to power and real estate, giving it ownership of 1.3 gigawatts of gross capacity across Core Scientific’s U.S. data centers, with an additional gigawatt available for future growth. CoreWeave said it is still deciding whether to divest Core Scientific’s cryptocurrency mining business, which was responsible for 89% of Core Scientific’s first-quarter revenue.
CoreWeave said it may reconfigure Core Scientific to focus on handling AI workloads rather than Bitcoin (BTC) mining. Core Scientific employs more than 300 people. It has worked with CoreWeave on-and-off since 2018. CoreWeave went public in March of this year, and its share price has risen 330% since then.
Is CRWV Stock a Buy?
The stock of CoreWeave has a consensus Moderate Buy rating among 18 Wall Street analysts. That rating is based on six Buy, 11 Hold, and one Sell recommendations issued in the last three months. The average CRWV price target of $78.53 implies 50% downside from current levels.
