So the name is Core Scientific (CORZ) - a data center play that offers digital mining (crypto mining) services. Among their other services is AI-related services.
Recent tech IPO Coreweave (CRWV) - focused on AI-related data centers took a major interest, and have announced an all stock merger. Since I missed CRWV’s hockey stick price rise after its IPO, I figure CORZ represents a back-door way of playing CRWV.
So, based on the share exchange ratio, a little over 8 shares of CORZ gets me a share of CRWV. Other than the data point that the acquisition closes in the fourth quarter, I don’t have a more precise date. However, if one os expecting upside from CRWV further down the road, acquiring CORZ shares seems like a nice way to eventually own CRWV. Much cheaper, too. Obviously, if the merger dos not go through, that’s possibly a negative for the CRWV back-door play.
Actually 40%. First of all it is all-stock deal with fixed ratio. So, it depends on $CRWV holding its price. The typical strategy of shorting $CRWV to lock in the price doesn’t work that well because according to IBKR the borrow rate is 150%. Also there is $CRWV lockup expiration which could potentially push the price down.
Having said that all, I have asked @XMFRoyal for second pair of eyes view. Let us see if he can come up with something. If Jim is not going to conjure something then, it is a pass for me.
@buynholdisdead - If one traces back, CORZ tumbled significantly shortly after the merger deal was announced - maybe 18%. That’s when the arbitrage gap initially widened. The gap has continued to widen from there. That’s when I took more interest. Then the actual nibbles.
@Kingran - was aware of the lockup expiration. Been tracking Coreweave (CRWV) since prior to their IPO. When the CRWV price initially bounced, I thought - okay, this might run. But, it will probably cool off. I will just wait for the lockup period expiration. Maybe it might retrace some, and trade around its IPO price. So far, it hasn’t.
The Typical way to play it is to just buy the one which provides the most upside. If you want to borrow my shares I wll let you have them for 100% borrow rate.
Right that is what makes it tricky. Crwv could fall much further and would that drive Corz even lower? But I don’t think you would get that big of a difference if CRWV was not so volatile. I have CRWV and sold half at $180, still holding the other half.
I suspect that if CRWV has a large enough drop, Jensen and his $4T unicorn will ride in and help prop up the name. I mean, CRWV is a part of their (and AI’s) infrastructure, right?
Yeah, huge swing in the price of CRWV since its IPO of … all of 3.5 months ago… If you can’t hedge out the price risk by shorting CORZ… And just another 3-4 months (maybe 5) until it closes… That’s a lot of time for CRWV to retrace (or sure, go higher). But what would you do if you had an overvalued currency and got paid more by having a big company? You’d issue that currency while you could. (I’m thinking of Peloton > $100 a few years ago.) And good point about the lock-up, Kingran.
If you could borrow CORZ at a reasonable cost, I’d guess the spread would be fairly narrow, since you’d be betting primarily on merger risk and not price risk. Does someone want to own CORZ at IB and then get a cut of the reputed 150% cost of borrow? Ha.
I would like to see it drop to the 50sma and hold there. That would be the red line. Let’s see what happens but right now I am out and will not buy any more until I see it start to stabilize.
I would like to see it drop to the 200sma and stabilize that would be the black line. I think your idea is a good one but with CRWV being so volatile and not having any earnings it could be dangerous. Although I do think the new depreciation schedule in the BBB bill could be a catalyst for it. I am going to watch it and see but if I buy again I think it will be in Corz. Another thing I like is the liquidity in both stocks. If anyone is wrong it will be easier to get out.
I noticed that CRWV dropped out of IBD’s Top XX list. Not in the Top 10, not in the Top 20, not in the Top 30 … I stopped looking at #32. Meanwhile, another AI-related name has taken up the top spot.
I do not have access to that but since it has dropped below the 50sma line I doubt they would be happy. I sold my Corz but am watching to see if it comes back over the 50 to get back in. I thought it would hold the 50sma, but I was wrong. One thing I am noticing is the gap between Corz and Crwv is tightening. I was hoping it would be corz going up not crwv going down.
