Investors Thwart $9B Merger Over Valuation and Strategic Concerns

Core Scientific Inc. shareholders rejected a $9 billion merger proposal with CoreWeave Inc. on October 30, blocking the all-stock deal that had faced mounting opposition from major investors and proxy advisors. The vote, which failed to secure the required approval threshold, underscores growing skepticism about the valuation structure and long-term strategic alignment between the two AI and data center operators, according to a Cryptobriefing report.

The decision came after prominent shareholders, including Van Eck and Two Seas Capital, publicly opposed the transaction. Matthew Siegel, head of digital assets research at Van Eck, argued that Core Scientific could better capitalize on its AI infrastructure potential as an independent entity rather than selling "short" to shareholders. Van Eck, now Core Scientific's 28th-largest shareholder, also criticized the deal's "golden-parachute" executive compensation package, calling it a misalignment of interests, according to an InvestorsObserver report. Two Seas Capital, the first major investor to oppose the merger, had previously warned that the all-stock structure exposed Core Scientific shareholders to CoreWeave's volatile stock price without sufficient protections.

Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis further fueled the backlash by recommending against the deal, citing valuation concerns and risks tied to Core Scientific's standalone execution. While both firms acknowledged the strategic logic of combining CoreWeave's AI cloud infrastructure with Core Scientific's data centers, they emphasized that Core Scientific's current stock price likely undervalued its potential as a standalone entity in a CoreWeave release. Glass Lewis noted that no alternative buyers had emerged since CoreWeave's initial approach in June 2024, complicating the path for a revised offer.

CoreWeave CEO Michael Intrator defended the merger as a "best and final" offer, arguing it de-risked Core Scientific's standalone plan, which faces significant capital expenditures and execution hurdles. He highlighted access to CoreWeave's capital and the "attractive exchange ratio" approved by Core Scientific's board. However, analysts at Roth Capital Partners and Jefferies downplayed the likelihood of a revised deal, citing CoreWeave's refusal to adjust terms and the 18% premium at which Core Scientific shares traded above the implied offer price, as reported in a Yahoo Finance article and a separate Yahoo Finance article.

The rejection has shifted focus to Core Scientific's standalone prospects. Jefferies analysts raised their price target to $24 from $22, noting the company's 305 MW of billable capacity and potential to attract hyperscale tenants or transition to a REIT structure. Roth Capital upgraded Core Scientific to "Buy," projecting long-term value creation through colocation leasing and power expansion. Meanwhile, CoreWeave's stock price has shown resilience, with institutional buying outpacing insider sales and a "Moderate Buy" consensus among analysts.

With the merger blocked, Core Scientific's path forward remains uncertain. While management has emphasized its pivot to AI infrastructure and Bitcoin mining, the failed deal highlights the challenges of balancing shareholder interests in a rapidly evolving sector. CoreWeave, meanwhile, may need to reassess its M&A strategy as it navigates a competitive AI infrastructure landscape.