CRWV takes CORZ, Another Good Arbitrage Chance?

$CoreWeave, Inc.(CRWV)$ has announced plans to acquire $Core Scientific, Inc.(CORZ)$ in an all-stock transaction valued at approximately $9 billion, which is expected to close in Q4'25 and is of course ultimately dependent on regulatory and Core Scientific shareholder approval.

Transaction details

In an all-stock transaction, CoreWeave will acquire CoreWeave Class A common stock at a ratio of 0.1235 shares of CoreWeave Class A common stock for each share of Core Scientific stock, valued at the equivalent of $19.72 per share at the close of trading on July 7, representing a 33% premium to the current CORZ stock price

Upon completion of the acquisition, Core Scientific shareholders will own less than **10%** of the combined company.

Strategic Implications

The acquisition will enable CoreWeave to achieve vertical integration of its data center footprint, owning Core Scientific's data center infrastructure nationwide.This will help CoreWeave reduce future expansion risk and improve operational efficiencies.

• Power Resources: CoreWeave will have access to approximately 1.3 billion watts (1.3 gigawatts) of total power resources, with the potential to expand by an additional 1 billion watts (1 gigawatt) to support future computing needs.

• Business objectives: CoreWeave CEO Michael Intrator said the move will accelerate the deployment of artificial intelligence (AI) and high-performance computing (HPC) workloads on a much larger scale and significantly improve operational efficiency.

• Cost Savings: The transaction is expected to eliminate more than $10 billion in future lease expenses and realize annual cost savings of $500 million by 2027.

The acquisition is a strategic move by CoreWeave to enhance its data center capabilities, optimize its cost structure and support the growth of AI and HPC.

Shares of both companies fell following the announcement, with CoreWeave down 3% and Core Scientific down nearly 18%, reflecting market concerns about the short-term financial impact of the transaction.

Arbitrage opportunities

The current price is at a ~34% discount to the offer price, which could be profitable if the deal closes, subject to hedging the risk of volatility in the CRWV share price (due to the dependence of the exchange on the CRWV share price).

CORZ shares converge towards 0.1235 CRWV shares, while the risk of exchange value volatility can be hedged by shorting CRWV.

1. Directly shorting CRWV, the

   1. One lot of CORZ needs to be shorted by 12.35 shares, or

   2. LONG 810 shares of CORZ and SHORT 1 lot of CRWV.

2. Short CRWV with an option to buy the PUT at your target price for CRWV, or the CALL at that price.

   1. The advantage of buying the PUT is that you can simultaneously hedge against a large drop in CRWV, the disadvantage is that you pay premium;

   2. Selling CALL has the benefit of harvesting additional premium, but the potential for a loss in the event of a large drop in CRWV;

3. Hedging through an option strategy is done approximately 8:1

   1. Buy 8 CALLs on CORZ while selling 1 CALL on CRWV or buying 1 PUT on CRWV

4. Convertible Bond Arbitrage. coreWeave issues a high-yield junk bond (e.g., maturing in 2030 with a 9.25% coupon), and the bond price rises after the announcement (e.g., 103.13 cents on the dollar)

   1. Buy CRWV Convertible Bonds: Get fixed income while being able to convert to profit if CRWV stock price rises.

   2. Pair trade: long CRWV bonds + short CRWV stock, betting on credit rating upgrade after M&A but short-term pressure on stock price.