Jefferies, the investment bank, indicated that shareholders of Core Scientific (CORZ) are likely to reject the merger proposal with CoreWeave (CRWV) in the upcoming vote on October 30, especially since CORZ shares are trading about 18% higher than the suggested offer price.
This premium signals that investors believe the merger undervalues Core Scientific, and Jefferies forecasts a negative outcome unless CoreWeave’s stock experiences a significant increase, as stated in a report issued on Tuesday.
Proxy advisor ISS, along with a major stakeholder, Two Seas Capital, have recommended that investors turn down the deal, raising concerns about valuation and structural issues.
The valuation of Core Scientific is still intricate. When adjusted for land banks and bitcoin mining operations, CORZ’s valuation is competitively aligned with Applied Digital (APLD), positioned lower than Cipher Mining (CIFR), and above TeraWulf (WULF), indicating mixed perspectives on whether it is undervalued or fully valued, as noted by analysts Jonathan Petersen and Jan Aygul.
The analysts pointed out that even if the merger does not go through, Core Scientific is well-equipped to generate value independently. With a billable IT load of 305 megawatts (MW) accessible, the company could lease capacity to CoreWeave or draw in a new hyperscale or “neocloud” client, reinforcing its shift towards high-performance computing.
Further leasing, power enhancements, or new site acquisitions could boost its valuation, and Jefferies noted that transitioning to a REIT model in the future could unveil additional growth opportunities.
However, the report warned that a negative vote could complicate Core Scientific’s rapport with CoreWeave, possibly making new tenants reluctant to engage. Nevertheless, CoreWeave’s increasing demand for GPU capacity could still lead to renewed discussions between the companies.
In a show of confidence in Core Scientific’s standalone potential, the bank’s analyst raised the price target from $22 to $24.
In early trading, Core Scientific shares rose by 1.7%, hovering around $20.44.
Read more: Bitcoin Miner Core Scientific Upgraded to Buy on AI Data Center Boom: H.C. Wainwright
