Shareholder Revolt and the Perils of All-Stock M&A in AI Infrastructure: A Case Study of CoreWeave and Core Scientific

The proposed $9 billion all-stock merger between CoreWeave and Core Scientific has ignited a firestorm of shareholder resistance, exposing the fragility of valuation logic in high-stakes AI infrastructure consolidation. At the heart of the dispute lies a fundamental question: Can a fixed exchange ratio in a volatile market truly align the interests of acquirer and target, or does it create a rigged game where one side's gains are another's losses?

The Strategic Rationale: Vertical Integration in a High-Stakes Sector

CoreWeave's bid to acquire Core Scientific is framed as a masterstroke of vertical integration. By combining CoreWeave's AI compute capabilities with Core Scientific's 1.3 gigawatts of secured power and 250 megawatts of AI-ready colocation capacity, the merged entity aims to eliminate $10 billion in future lease costs and generate $500 million in annual synergies. The logic is compelling: as AI workloads surge, owning the power infrastructure becomes a critical differentiator. CoreWeave CEO Michael Intrator has emphasized the “future-proofing” of the company's growth, arguing that the deal will insulate it from the volatility of third-party data center providers.

But for Core Scientific shareholders, the math tells a different story.

Valuation Misalignment and the Absence of Downside Protection

The deal's fixed exchange ratio—0.1235 CoreWeave shares for each Core Scientific share—was set using CoreWeave's 5-day volume-weighted average price (VWAP) of $20.40 as of July 3, 2025. This implied a 66% premium over Core Scientific's unaffected share price of $12.30. However, since the announcement, CoreWeave's stock has plummeted by over 30%, reducing the effective valuation of Core Scientific shares from $20.25 to just $13. This collapse has left shareholders reeling, particularly as CoreWeave's EV/EBITDA multiple of 58.7x starkly contrasts with Core Scientific's Q1 2025 Adjusted EBITDA of -$6.1 million.

The lack of a price collar or other safeguards has become a rallying point for dissent. Two Seas Capital, Core Scientific's largest active shareholder with a 6.3% stake, has led the charge, arguing that the all-stock structure exposes Core Scientific shareholders to full exposure of CoreWeave's valuation risks without commensurate upside. With nearly 290 million shares set to be released into the market following an IPO lock-up expiry, the potential for further dilution looms large.

The Shareholder Revolt: A Battle for Fairness

Two Seas Capital and its allies—hedge funds like JAT Capital and Parsifal Capital—are not merely objecting to the deal's terms; they are challenging the very premise of its valuation. Core Scientific's asset base includes $1.625 billion in total assets and $697.9 million in liquidity, yet the merger offers no cash consideration or performance-based adjustments to reflect these tangible resources. Instead, shareholders are left to bet on CoreWeave's ability to maintain its speculative valuation in a sector prone to rapid shifts.

The hedge fund's critique is not just financial but philosophical. “This is a classic case of a high-flying acquirer using its inflated stock to acquire undervalued assets at a discount,” one Two Seas analyst noted. The absence of competing bidders and the lack of a cash component have only deepened suspicions that CoreWeave is leveraging its post-IPO momentum to secure a bargain.

Strategic Merits vs. Operational Risks

While the strategic logic of vertical integration is sound, the execution risks are significant. CoreWeave's debt load and reliance on a narrow customer base—Microsoft accounted for 72% of its Q1 2025 revenue—raise questions about its ability to absorb Core Scientific's $1.6 billion in liabilities. The repurposing of crypto-mining facilities into AI-ready infrastructure also carries technical and regulatory uncertainties. For Core Scientific shareholders, the promise of $500 million in annual cost savings feels abstract when their immediate risk is a 30% devaluation of their stake.

The Path Forward: A Test of Shareholder Power

The coming months will determine whether this merger becomes a cautionary tale of misaligned incentives or a blueprint for successful consolidation. Proxy advisers like Institutional Shareholder Services (ISS) will play a pivotal role in shaping the outcome of the shareholder vote, expected in autumn 2025. If Two Seas Capital and its allies succeed in forcing revisions—such as a collar agreement or a higher exchange ratio—the deal could still proceed. But if the current terms remain unaltered, the merger may collapse, leaving CoreWeave to either pivot to alternative strategies or face a credibility crisis.

For investors, the lesson is clear: in volatile sectors like AI infrastructure, all-stock deals without price safeguards are inherently risky. Active shareholders must remain vigilant, and acquirers must demonstrate that their valuations are grounded in reality, not just hype.

Investment Advice: Navigating the M&A Minefield

For those considering exposure to AI infrastructure, the CoreWeave-Core Scientific saga underscores the importance of scrutinizing deal structures. Look for mergers that include cash components, performance-based adjustments, or price collars to mitigate downside risk. Additionally, monitor proxy voting trends and the influence of activist shareholders—these can be early indicators of a deal's viability. In a market where valuations can swing wildly, the most resilient investments are those that balance ambition with prudence.

The battle over this $9 billion merger is more than a corporate drama; it's a microcosm of the broader tensions shaping the AI economy. As the sector races to secure power and compute dominance, the question of who bears the risk—and who reaps the rewards—will define the next chapter of its evolution.