Corporate Governance Risks in Tech Infrastructure Deals: ISS's Stance on CoreWeave's Core Scientific Acquisition

Institutional Shareholder Services (ISS), one of the most influential proxy advisors, has thrown its weight behind shareholder resistance to CoreWeave's proposed $9 billion all-stock acquisition of Core Scientific, citing significant corporate governance risks. The deal, which aims to vertically integrate two of the largest players in data center infrastructure, has sparked a firestorm of criticism from institutional investors, particularly Two Seas Capital, Core Scientific's largest active shareholder. This case underscores broader concerns about governance practices in high-stakes tech infrastructure mergers, where opaque processes, inadequate shareholder protections, and financial instability can undermine long-term value creation.

A Flawed Deal Structure: Volatility and Lack of Protections

At the heart of ISS's opposition lies the all-stock nature of the transaction, which exposes Core Scientific shareholders to the volatility of CoreWeave's stock price. According to a Data Center Dynamics report, Two Seas Capital has argued that the deal lacks "collar provisions" to shield investors from swings in CoreWeave's equity value, a critical oversight given the company's recent stock performance. CoreWeave's shares have experienced significant price swings in 2025, raising concerns about the stability of the consideration offered to Core Scientific shareholders, according to a CryptoNews article.

The absence of such protections is particularly problematic in a sector where macroeconomic conditions and technological shifts can rapidly alter valuations. As stated by Two Seas in a definitive proxy statement, the deal's structure "materially undervalues Core Scientific's intrinsic and strategic worth," a point highlighted in a GuruFocus article. This critique is amplified by the fact that CoreWeave's latest offer-a 6% premium over Core Scientific's stock price-pales in comparison to its earlier 18% premium proposal in June 2024, a detail reported by Data Center Dynamics.

Process Flaws and Strategic Underbidding

ISS's concerns extend beyond the deal's financial structure to its rushed approval process. Core Scientific's board finalized the transaction in just one month, a timeline Two Seas Capital describes as "deficient" for a deal of this magnitude, as reported by Data Center Dynamics. The firm argues that the board failed to explore alternative bidders or conduct meaningful market analysis, potentially leaving shareholders exposed to a suboptimal outcome, according to CryptoNews.

This critique resonates with broader governance principles emphasizing the need for robust due diligence in mergers. A Reuters report notes that Core Scientific's stock plummeted 18% following the announcement, a drop Two Seas interprets as a "market signal of skepticism" about the deal's fairness. The rapid approval process, combined with the lack of competitive bidding, has led critics to question whether the board prioritized short-term certainty over maximizing shareholder value, a concern echoed by GuruFocus.

Financial Health and Shareholder Alignment

CoreWeave's financial health further complicates the governance calculus. Institutional investors have highlighted CoreWeave's negative operating and net margins, a negative equity position, and a high volatility rating as red flags, as noted by GuruFocus. These metrics raise concerns about the acquirer's ability to sustain the merged entity's operations, particularly in a capital-intensive industry like data centers.

Two Seas Capital has also criticized the transaction's alignment with executive incentives, noting that Core Scientific executives stand to benefit from immediate vesting of equity and excise tax reimbursements, while shareholders face uncertain long-term gains, a critique reported by Data Center Dynamics. This misalignment underscores a recurring governance issue in tech infrastructure deals: the prioritization of management interests over those of dispersed shareholders.

CoreWeave's Defense and Strategic Rationale

CoreWeave has defended the merger as a "best and final offer" that de-risks Core Scientific's standalone strategy while unlocking operational efficiencies, according to Data Center Dynamics. The company projects $10 billion in cumulative savings over 12 years and $500 million in annual savings by 2027, citing cost reductions from eliminating lease overhead and streamlining operations, as reported by GuruFocus. CEO Chad M. Couture has dismissed shareholder criticisms as "misleading and misinformed," emphasizing the strategic benefits of vertical integration in AI and high-performance computing (HPC) markets, per Data Center Dynamics.

However, these arguments fail to address the governance concerns raised by ISS and Two Seas. The projected savings, while substantial, are contingent on CoreWeave's ability to execute its integration strategy-a task complicated by its own financial fragility.

Broader Implications for Tech Infrastructure Mergers

The CoreWeave-Core Scientific case highlights systemic governance risks in tech infrastructure deals, where complex valuations, regulatory scrutiny, and market volatility create fertile ground for shareholder disputes. ISS's opposition signals a growing emphasis on transparency, competitive bidding, and risk mitigation in M&A transactions. For institutional investors, the deal serves as a cautionary tale about the perils of all-stock offers in volatile sectors and the importance of rigorous board oversight.

Conclusion

As the vote on CoreWeave's acquisition looms, the debate over governance risks in tech infrastructure deals remains unresolved. ISS's stance, backed by Two Seas Capital's activism, reflects a broader shift toward shareholder-centric governance in an industry increasingly defined by consolidation. For investors, the case underscores the need to scrutinize not just the strategic logic of mergers but also the processes and protections that underpin them. In a sector where value creation is as much about governance as it is about technology, the CoreWeave-Core Scientific deal may well become a benchmark for future transactions.