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Welcome to the VIP edition newsletter from ALPHA, our Stock Deep Dive! We're committed to delivering top-notch financial insights, expert analysis and research, and market updates to help you make informed investment decisions.
In this edition, you’ll read an in-depth analysis of a great stock we’ve been watching: 👇
Stock Deep Dive: Core Scientific (CORZ-US, $1.6B MCAP)
You get a story with nearly every possible buzzword in the headline every so often.
While this is commonly clickbait and a telltale sign that the company will fail…there are some exceptions.
When actual revenue starts to materialize and you have a huge company pivot, investors start to do their best Roaring Kitty impression:
This is one of those cases.
In this deep dive, we’ll look at a much more speculative stock and see if it is worth putting on our screen. Usually, I focus on fundamentally sound companies with long track records and strong possibilities for future growth.
Let’s see if we can crack the code on this high-flyer.
Why Now?👉 Huge Contract Signed, Unsolicited Takeover Bid
History👉 SPAC → Reorg → Rejected Takeover
Overview 👉 What Does Core Scientific Do?
Market Opportunity 👉 Capitalize on Rush to Power Servers
Value Proposition 👉 CoreWeave + CORZ Relationship
Risks 👉 Potential Pitfalls
Why Now?👉 Huge Contract Signed, Unsolicited Takeover Bid
On June 3, Core Scientific (CORZ) announced the signing of a series of 12-year contracts worth $3.5B with CoreWeave, the AI Hyperscaler.
Under the agreements, Core Scientific will deliver approximately 200 megawatts of infrastructure to host CoreWeave’s high-performance computing (HPC) operations. Per the agreements, CoreWeave will fund all capital investments required to modify Core Scientific’s existing infrastructure into cutting-edge, application-specific data centers customized for dense HPC.
The existing infrastructure is bitcoin mining. They are converting this to AI data centers. Buzz-words galore…
Core Scientific will modify multiple existing, owned sites to host CoreWeave’s NVIDIA GPUs. The site modifications are expected to commence early in the second half of 2024 and achieve operational status in the first half of 2025.
But the drama wasn’t done yet…
Mere DAYS later, CoreWeave offered to buy out CORZ, which was rejected, and the stock jumped again. More on this below…
History👉 SPAC → Reorg → Rejected Takeover
First, let’s take a step back.
CORZ, originally a pure-play Bitcoin mining company, went public through a SPAC transaction in January 2022. The deal valued Core Scientific at approximately $4.3 billion and was part of a wave of SPAC mergers in the cryptocurrency and technology sectors during that period.
CORZ filed for Chapter 11 protection in December 2022 following a volatile year for cryptocurrency operators (which included the bankruptcy of then-counterparty Celsius Network). One of the reasons CORZ cited as a rationale for seeking court protection was an increase in electricity costs, but also due to liquidity issues and the need to restructure its debt.
CORZ then entered protection with a Restructuring Support Agreement and reemerged as a recapitalized and exchange-listed public company in January 2024. Upon reemergence, CORZ stated that its new business plan involved preparing for an anticipated halving of Bitcoin block awards and intended to “create value by transforming energy into high-value compute for Bitcoin mining and other potential applications.” Those other applications? AI servers. Which brings us to the recent run…
On March 6, CORZ announced an agreement with privately held data AI hyperscaler CoreWeave to provide 16MW of data center infrastructure at a stated contract value of $100 million. This was the first contract before the big one…
Just days after announcing the $3.5B partnership with CoreWeave on June 6 (mentioned above), CORZ rejected an unsolicited $1B takeover offer from CoreWeave. Late Monday, CoreWeave, which has raised billions of dollars and is mulling an initial public offering, proposed to acquire the miner with $5.75 per share in cash.
Core Scientific shares jumped 16% to $8.30 the following Thursday, with the stock surging around 70% since the initial takeover offer. “The Board determined that the CoreWeave proposal significantly undervalues the company and is not in the best interests of the company and its shareholders,” Core Scientific said in a statement on Thursday.
Talk about drama.
Overview 👉 What Does Core Scientific Do?
Crypto Mining
CORZ is a digital currency mining company with two main business segments: self-mining (mining Bitcoin for its own book), and hosting (contracts with third-party miners to use CORZ’s mining capacity and services).