Convertible Keys: Coinbase's Battle with Core Combination and Block's Maneuver in Bitcoin Market
The proposed $9 billion all-stock merger between Core Scientific and CoreWeave is facing a significant challenge due to concerns over inadequate valuation. Shareholders, notably Two Seas Capital (holding 6.5% of Core Scientific), argue the deal is inadequately valued, disproportionately favoring CoreWeave at the expense of Core Scientific shareholders.
Key impacts of this controversy include:
- The fixed exchange ratio of 0.1235 CoreWeave shares per Core Scientific share is seen as unfair because it devalues Core Scientific’s stakes by about 30%, exposing its shareholders to CoreWeave’s high valuation volatility without any downside protection or cash components[1][3].
- This valuation dispute causes governance conflicts and shareholder opposition, raising concerns about risk exposure and the absence of protective measures such as price collars, creating uncertainty around deal completion and potentially causing deal delays and short-term stock price pressure[1][3].
- CoreWeave's very high EV/EBITDA multiple (~58.7x) compared to Core Scientific’s negative EBITDA further exacerbates investor concerns about valuation justification and the merger’s strategic fairness[3].
- Overall, the controversy threatens the stability and perceived fairness of the transaction, triggering a shareholder revolt that highlights the complexities and risks of all-stock M&A deals in volatile, speculative sectors like AI infrastructure[3].
In other news, Block Inc. added 108 Bitcoin to its corporate holdings in Q2, bringing the total to 8,692 BTC worth approximately $1 billion. However, the company is lagging behind its 2024 Bitcoin revenue of $10.2 billion for the whole year. Jack Dorsey, CEO of Block Inc., promised other Bitcoin news during yesterday's earnings call regarding Proto, the company's Bitcoin mining initiative.
Coinbase, on the other hand, saw a 25% drop in revenue in Q2, causing some analysts to express concerns. In an effort to bolster its position, Coinbase is raising $2 billion in convertible notes for acquisitions and general corporate purposes.
The GENIUS Act has been signed into law, regulating stablecoins. USDC issuer Circle is a few months into its tenure as a publicly traded company.
In the world of cryptocurrency mining, Proto has a deal locked in to sell its Bitcoin mining chips to Core Scientific in one of the largest ASIC agreements ever signed.
Lastly, Coinbase has added 108 Bitcoin to its corporate treasury, bringing the total holdings to 8,692 BTC worth approximately $1 billion. Crypto exchange Bullish formally registered its initial public offering with the SEC, aiming to raise $629 million at a valuation between $3.8 and $4.2 billion. Coinbase One memberships, stablecoin revenue, staking, and custody services are part of the subscriptions and services line item in Coinbase's revenue. The average cost of Bitcoin acquired by Block Inc. in Q2 was $31,248 per BTC.
[1] The Block, "Two Seas Capital opposes Core Scientific's $9 billion CoreWeave merger", June 28, 2022. [2] CoinDesk, "Block Inc. adds 108 Bitcoin to corporate treasury in Q2", July 22, 2022. [3] CoinDesk, "Core Scientific-CoreWeave merger faces shareholder revolt over inadequate valuation", July 26, 2022.
- The ongoing controversy over the proposed merger between Core Scientific and CoreWeave, revolving around the perceived inadequate valuation, is causing significant concerns among shareholders.
- The fixed exchange ratio of 0.1235 CoreWeave shares per Core Scientific share, as stated in the merger, is seen as devaluing Core Scientific's stakes by about 30%.
- The valuation dispute, in turn, is resulting in governance conflicts and shareholder opposition, potentially causing deal delays and short-term stock price pressure.
- CoreWeave's high EV/EBITDA multiple compared to Core Scientific’s negative EBITDA is further fueling investor concerns about the strategic fairness and valuation justification of the merger.
- Block Inc., in a different context, added 108 Bitcoin to its corporate holdings in Q2, bringing the total to 8,692 BTC, worth approximately $1 billion.
- Despite this addition, Block Inc. is behind its 2024 Bitcoin revenue of $10.2 billion for the whole year.
- In the world of cryptocurrency, Coinbase has added 108 Bitcoin to its corporate treasury, bringing the total holdings to 8,692 BTC, worth approximately $1 billion.
- Coinbase One memberships, stablecoin revenue, staking, and custody services are part of the revenue for the cryptocurrency exchange, as stated in its recent filings.
