Two Seas Capital Throws a Wrench in CoreWeave’s Acquisition Plans
In a surprising move, Two Seas Capital, a significant stakeholder in Core Scientific, has announced its opposition to the company’s proposed acquisition by CoreWeave. The investment firm, which holds a 6.3% stake in the Bitcoin miner, has expressed concerns over the valuation and deal structure, citing that the all-stock nature of the transaction undervalues Core Scientific and leaves investors vulnerable to price fluctuations.
The Objection
Two Seas Capital’s founder and CIO, Sina Toussi, penned an open letter to fellow shareholders, outlining the firm’s objections to the deal. While they’re not opposed to a merger between the two companies in principle, they believe the current terms are “deficient” and unfairly favor CoreWeave at the expense of Core Scientific shareholders. Toussi emphasized that they support Core Scientific’s long-term strategy and have confidence in the company’s ability to grow independently, driven by rising demand for computing power fueled by AI applications.
A Question of Valuation
The crux of the issue lies in the valuation of Core Scientific. Two Seas Capital argues that the company’s worth is not accurately reflected in the proposed deal, and that the all-stock structure exposes investors to unnecessary risk. With the AI infrastructure sector experiencing significant volatility, the firm is calling on Core Scientific’s board to renegotiate the terms to better reflect the company’s true value, including potential synergies. This move has sparked a broader debate about the suitability of all-stock mergers in the sector, particularly when it comes to protecting shareholder interests.
Broader Implications
The opposition from Two Seas Capital may indicate a shift in expectations among institutional investors, who are increasingly seeking greater transparency and governance in high-growth infrastructure sectors. As the demand for compute infrastructure continues to rise, driven by the growing need for AI-powered applications, investors are becoming more discerning about the terms of mergers and acquisitions. The Core Scientific case serves as a checkpoint, highlighting the importance of careful consideration and negotiation in deal-making, especially when it comes to valuations and shareholder protections.
With Two Seas Capital planning to solicit other shareholders to vote against the current terms, the fate of the proposed acquisition remains uncertain. One thing is clear, however: the investment firm’s objections have thrown a wrench in CoreWeave’s plans, and the outcome will be closely watched by industry observers and investors alike.
