Core Scientific's Merger Under Fire: Undervaluation Claims and Regulatory Scrutiny Intensify

The proposed $9 billion merger between Core Scientific (CORZ) and CoreWeave (CRWV) has become a lightning rod for investor skepticism and regulatory scrutiny. At the heart of the controversy lies a simple question: Is the fixed exchange ratio of 0.1235 CoreWeave shares for every Core Scientific share a fair deal, or does it leave shareholders holding the short end of the stick? With CoreWeave's stock down 30% since the deal was announced, according to an OKX report and two major law firms launching investigations, including Johnson Fistel, this is a moment of reckoning for both companies-and a critical inflection point for investors.

The Merger Terms: A Fixed Ratio in a Volatile Market

The merger's structure is deceptively straightforward: Core Scientific shareholders will receive 0.1235 shares of CoreWeave Class A stock for each share they own, according to the merger registration. On paper, this implied a valuation of $20.40 per Core Scientific share when the deal was announced, based on CoreWeave's July 3 closing price of $165.20. But markets are fickle. CoreWeave's stock has since cratered, eroding nearly a third of its value. That means the same exchange ratio now implies a significantly lower price for Core Scientific's assets-a fact that has shareholders and analysts alike raising red flags.

According to a Reuters report, Core Scientific's stock plummeted 18% on the day the merger was announced, marking one of the worst one-day declines for an M&A target in recent history. Two Seas Capital, the largest active shareholder, has since filed a definitive proxy statement opposing the deal, arguing that the structure ties Core Scientific's fate to CoreWeave's volatile stock while the broader data center sector has surged. "This isn't just about the numbers-it's about the process," said a Two Seas representative in a press release. "The merger fails to reflect Core Scientific's growth potential and locks shareholders into a highly uncertain outcome."

Legal and Regulatory Scrutiny: A Perfect Storm

The merger's troubles aren't just financial-they're legal. Kahn Swick & Foti, LLC, led by former Louisiana Attorney General Charles Foti, is investigating whether the exchange ratio and the merger process itself adequately value Core Scientific. The firm is joined by Johnson Fistel, which is probing whether Core Scientific's board breached its fiduciary duties in negotiating the deal. These investigations are not idle threats; they could lead to shareholder lawsuits or even a forced revision of the terms.

Regulatory hurdles are compounding the pressure. The HSR antitrust review, which requires filings with the FTC and DOJ, was submitted on July 25, 2025, with the 30-day waiting period set to expire on August 25 unless extended. While the SEC has already filed the necessary SEC filings - including Form 8-K and S-4 registration statements - the agency's approval is far from guaranteed. A report by Timothy Sykes notes that Core Scientific's Q2 revenue miss and ongoing operational challenges have further muddied the regulatory waters.

What This Means for Investors

For retail and institutional investors alike, the Core Scientific–CoreWeave merger is a textbook case of "buyer beware." The fixed exchange ratio, while mathematically elegant, ignores the real-world volatility of CoreWeave's stock. If the company's share price continues to decline, Core Scientific shareholders could end up with a sliver of value that pales in comparison to what they might have received in an all-cash deal or a revised stock swap.

Moreover, the legal and regulatory risks are non-trivial. Shareholder lawsuits could delay or even derail the merger, while a regulatory rejection would force both companies back to the drawing board. As Foti's firm emphasizes in its investor alert, "The adequacy of the price and process must be scrutinized with the utmost rigor."

The Bottom Line

This merger is a high-stakes gamble. For CoreWeave, it's a chance to consolidate its position in the data center sector. For Core Scientific, it's a make-or-break opportunity to unlock value. But for shareholders, it's a reminder that even the most carefully structured deals can go awry when market conditions shift and governance processes falter.

Investors should monitor three key developments:
1. The outcome of the HSR review and SEC filings.
2. The trajectory of CoreWeave's stock price in the coming months.
3. Any updates from Kahn Swick & Foti or Johnson Fistel regarding potential legal action.

In the meantime, the message is clear: This deal is far from a done deal. And in the world of M&A, that's never a good sign.