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Major Shareholder Opposition Threatens Core Scientific Deal
The proposed $5 billion acquisition of Core Scientific by AI infrastructure giant CoreWeave is facing mounting investor opposition, casting serious doubt on one of the data center industry’s most significant mergers this year. Gullane Capital, Core Scientific’s third-largest shareholder with a $200 million stake, has joined other investors in rejecting the current terms, citing valuation concerns and structural flaws in the deal.
Trip Miller, founder of Memphis-based Gullane Capital, stated unequivocally to Business Insider: “Under the math of the deal today, I would have to vote no.” This opposition follows similar concerns raised by Two Seas Capital, which owns approximately 6.3% of Core Scientific’s stock and has publicly urged shareholders to reject the acquisition in the upcoming October 30 vote.
Deal Economics Shift as Stock Prices Fluctuate
When initially announced in July, the stock conversion deal valued Core Scientific at approximately $9 billion, representing a 66% premium at $20.40 per share. However, shifting market conditions have substantially altered the transaction’s economics. CoreWeave’s stock decline combined with Core Scientific’s price increase has reduced the current offer value to around $17 per share—below Core Scientific’s Friday market price of approximately $19.
“This is not a popular deal, I think for one simple reason: it’s a flawed structure,” Miller explained. “It would be a deal that would value my shares, actually, at a discount to what they currently trade for today.” This sentiment reflects broader concerns about how market trends are impacting major technology acquisitions.
Strategic Importance Versus Shareholder Value
CoreWeave CEO Michael Intrator has vigorously defended the acquisition, calling it “the most compelling path forward for Core Scientific stockholders” in an October 16 letter. He emphasized that the present deal represents CoreWeave’s “best and final” offer and dismissed Two Seas Capital’s objections as “misleading and misinformed.”
The acquisition holds strategic significance for CoreWeave’s expansion plans. Currently renting approximately 270 megawatts of data center space from Core Scientific, owning the company would save CoreWeave an estimated $10 billion in lease payments over the next 12 years. This aligns with CoreWeave’s aggressive infrastructure expansion, which aims to increase its operational data centers from 470 megawatts to over 900 megawatts by the end of 2025.
Broader Industry Context and Financial Concerns
CoreWeave’s rapid, debt-fueled growth exemplifies the intense competition in the AI infrastructure sector. The company has secured major deals with industry leaders including OpenAI, Meta, Microsoft, and Nvidia, helping drive its market capitalization to $70 billion—more than triple its post-IPO value. However, this expansion comes at a cost: operating margins fell from 20% to 2% year-over-year, while debt grew to $11.2 billion by the end of the second quarter.
Analyst Gil Luria has raised concerns about the sustainability of CoreWeave’s business model, noting: “They’re selling $20 bills for 15 bucks.” He questioned whether “this business should even exist,” highlighting the tension between rapid expansion and profitability in the current technology landscape where adaptation mechanisms are crucial for survival.
Conflicting Visions for Future Value
Two Seas Capital’s detailed presentation outlined multiple objections, particularly the lack of protection against stock fluctuations that have “upended the economics of the transaction.” The firm argued that “the initial headline deal price of $20.40 per share undervalued Core Scientific’s intrinsic value and strategic value to CoreWeave.”
Miller offered a contrasting vision for Core Scientific’s independent future: “The belief is, if you leave this company alone for 18 months, it’s a $30 to $40 company” per share. This optimism reflects the booming data center market and parallels other industry developments where companies are demonstrating remarkable resilience and growth potential.
Implications for AI Infrastructure Market
The outcome of this acquisition struggle will significantly impact the competitive landscape of AI infrastructure. CoreWeave has positioned the Core Scientific purchase as crucial to managing soaring costs while maintaining rapid growth. The acquisition would more than double CoreWeave’s operational megawattage and expand its pipeline of contracted future power by 50% to over 3 gigawatts.
Raul Martynek, CEO of DataBank, noted the strategic importance for CoreWeave: “They realize how important this is to the long-term viability of their business model, owning the economics around their largest cost, which is data centers.” This situation reflects broader market trends where companies are seeking to control their entire value chain amid increasing operational complexities.
As the October 30 shareholder vote approaches, the conflict highlights fundamental questions about valuation, strategic direction, and the balance between immediate acquisition benefits versus long-term independent growth potential in the rapidly evolving AI infrastructure sector.
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