Major Shareholder Joins Growing Opposition
CoreWeave’s ambitious $5 billion acquisition of Core Scientific has hit another significant roadblock as Gullane Capital, the third-largest shareholder in Core Scientific, announced it will vote against the proposed merger. Trip Miller, founder of the Memphis-based investment firm, told Business Insider he would reject the deal under its current terms, citing valuation concerns that have intensified as market conditions shifted.
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Miller’s opposition represents the latest in a series of setbacks for what would be one of the data center industry’s largest mergers this year. Gullane Capital holds approximately $200 million worth of Core Scientific stock, making it a substantial voice in the upcoming shareholder vote scheduled for October 30.
The Valuation Dilemma
The core issue troubling investors stems from a significant shift in the deal’s economics since its announcement in July. Originally structured as a stock conversion valuing Core Scientific at approximately $9 billion with a $20.40 per share offer—representing a 66% premium—the transaction’s value has deteriorated as CoreWeave’s stock price declined while Core Scientific’s shares appreciated.
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“This is not a popular deal, I think for one simple reason: it’s a flawed structure,” Miller stated. “It would be a deal that would value my shares, actually, at a discount to what they currently trade for today.” The deal now values Core Scientific shares at around $17, substantially below Friday’s market price of approximately $19.
Strategic Importance for CoreWeave’s AI Ambitions
For CoreWeave, the acquisition represents a critical component of its aggressive expansion strategy in the competitive AI infrastructure market. The company has positioned itself at the forefront of the booming data center business, achieving a remarkable $70 billion market capitalization since its March IPO—more than triple its initial public offering value.
The company’s growth has been fueled by major partnerships with AI industry leaders including OpenAI, Meta, Microsoft, and Nvidia. CoreWeave currently rents approximately 270 megawatts of data center space from Core Scientific, and owning the company outright would potentially save CoreWeave about $10 billion in lease payments over the next 12 years—addressing what analysts identify as one of its largest cost centers.
Broader Industry Context and Market Dynamics
The opposition from Gullane Capital follows similar concerns raised by Two Seas Capital, another investment firm holding about 6.3% of Core Scientific’s stock. In an extensive presentation published October 14, Two Seas outlined multiple objections to the acquisition, arguing it insufficiently compensates shareholders and fails to provide protection against stock price fluctuations that have undermined the transaction’s original value proposition.
These market tremors signal a shift in investor sentiment toward highly leveraged growth strategies in the technology sector. As companies like CoreWeave pursue aggressive expansion through debt-financed acquisitions, shareholders are increasingly scrutinizing the long-term viability of such approaches, particularly when operating margins compress dramatically despite revenue growth.
Financial Pressures and Strategic Imperatives
CoreWeave’s financial metrics reveal the tension between rapid growth and sustainable profitability. While second-quarter revenue reached $1.2 billion—more than double the same period last year—operating margins collapsed from 20% to just 2% year-over-year. Meanwhile, the company’s debt burden grew to $11.2 billion by the end of the second quarter, a 40% increase since the beginning of the year, with borrowing costs ranging from 7% to 15% across its various loans.
Analyst Gil Luria expressed skepticism about the company’s business model, noting: “They’re selling $20 bills for 15 bucks. Sometimes we forget to ask ourselves if this business should even exist. I’m not sure the answer is yes.” This sentiment reflects broader concerns about whether the current AI infrastructure boom represents sustainable growth or speculative excess.
Leadership’s Defense and Strategic Rationale
In response to mounting opposition, CoreWeave CEO Michael Intrator published a letter on October 16 defending the acquisition as “the most compelling path forward for Core Scientific stockholders” and declaring the current offer as CoreWeave’s “best and final” proposal. Intrator characterized Two Seas Capital’s complaints as “misleading and misinformed” while emphasizing the strategic benefits of vertical integration.
“The combination will offer Core Scientific and CoreWeave stockholders the opportunity to benefit from the tremendous upside potential and long-term value creation driven by greater verticalization,” Intrator wrote. He also highlighted CoreWeave’s significance to Core Scientific’s business, noting that it accounts for 76% of the company’s revenue and represents its only meaningful data center customer.
Industry Perspectives and Future Implications
Raul Martynek, CEO of DataBank (which is not involved in the transaction), observed that CoreWeave’s aggressive pursuit of the acquisition reflects the strategic importance of controlling data center economics. “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,” Martynek stated.
The outcome of the October 30 shareholder vote will have significant implications not only for both companies but for the broader AI infrastructure sector. As industry developments continue to evolve and related innovations emerge across technology sectors, the CoreWeave-Core Scientific saga represents a critical test case for how investors balance short-term valuation concerns against long-term strategic positioning in high-growth markets.
Meanwhile, as companies navigate these complex transactions, they must also consider external factors such as recent technology policy developments and market trends that could influence both operational costs and growth opportunities. The resolution of this acquisition battle will undoubtedly shape investment approaches toward similar technology infrastructure deals in the coming months.
Looking Ahead: Alternative Scenarios
Miller of Gullane Capital suggested that Core Scientific might achieve substantially higher valuation as an independent company in the current hot data center market. “The belief is, if you leave this company alone for 18 months, it’s a $30 to $40 company” per share, he stated, indicating his view that Core Scientific could become a more lucrative acquisition target if it remains independent longer.
This perspective highlights the fundamental disagreement between CoreWeave’s leadership and dissenting shareholders about Core Scientific’s standalone prospects and the appropriate valuation methodology for companies operating in one of technology’s most dynamic sectors. As the vote approaches, both sides are likely to intensify their efforts to persuade other shareholders, setting the stage for a decisive moment in both companies’ trajectories.
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