Monday, 17 June 2024
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Core Scientific Rejects $1 Billion Buyout Offer from CoreWeave


Core Scientific (CORZ) has rejected an “unsolicited” $1 billion buyout offer from CoreWeave, deeming it significantly undervalued and not in the best interests of its shareholders. The proposal, which offered $5.75 per share, came shortly after the two companies signed a series of 12-year contracts for Core Scientific to provide 200 megawatts of infrastructure to support CoreWeave’s high-performance computing (HPC) AI services.

Per Core Scientific, the board, in consultation with independent financial and legal advisors, concluded that the proposal did not reflect the company’s growth prospects and long-term value-creation potential. It also made a point to clarify the offer was “unsolicited” by using the term in the title of its press release.

Core Scientific intends to work on executing the previously announced contracts with CoreWeave, which are expected to generate over $3.5 billion in cumulative revenue. The agreements marked a strategic shift for Core Scientific, traditionally known for its bitcoin mining operations, as it diversifies into the AI data center space.

CORZ shares were trading at around $4.84 before the partnership announcement and subsequently rose to around $7.15. The CoreWeave offer at $5.75 per share is well above Core Scientific’s share price before the partnership announcement but lower than current prices, indicating the board believes its share price is not overinflated due to its new deal.

CoreWeave will fund all capital investments required for the infrastructure modifications, estimated at $300 million, which will be credited against hosting payments until fully repaid. This partnership is anticipated to generate an average annual revenue of approximately $290 million, enhancing Core Scientific’s earnings power and driving shareholder value.

The company’s decision to reject the buyout offer emphasizes its confidence in its Bitcoin mining and the strategic benefits of the CoreWeave partnership alone. CEO Adam Sullivan highlighted that the demand for high-power sites continues to outpace supply, positioning Core Scientific to meet customer needs more effectively than greenfield data center projects. The partnership allows Core Scientific to balance its portfolio between Bitcoin mining and alternative compute hosting, maximizing cash flow and minimizing risk while maintaining significant exposure to Bitcoin’s potential upside.

Core Scientific’s shift towards AI infrastructure coincides with the recent Bitcoin…

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