CORZ

Core Scientific ($CORZ) Rejects $9B Offer: Insiders' 'Contrarian Investment' Strategy Revealed

11/06/2025 21:29

Core Scientific ($CORZ) stands out with its unique business model combining bitcoin mining and AI data center infrastructure. Based in Delaware, the company operates approximately 170,000 bitcoin miners across the United States while simultaneously providing high-performance computing infrastructure to AI companies like CoreWeave. With a current market capitalization of $6.3 billion, it holds a leading position in the digital asset mining industry. The most notable recent development was shareholders' rejection of CoreWeave's $9 billion acquisition offer in October. This decision goes beyond a simple transaction rejection, demonstrating strong market confidence in Core Scientific's independent value. Major shareholder Two Seas Capital and proxy advisory firms like ISS determined that the offer undervalued the company's true worth, particularly considering the explosive growth potential of the AI infrastructure market. Insider trading patterns reveal fascinating strategic thinking. During mid-2024 when the stock surged from $4.87 to the $18 range, CEO Adam Sullivan and officer Todd Duchene executed large-scale sales. Notably, in January 2025, Sullivan sold $6 million worth of shares when the stock was at $16 highs. Directors, however, took the opposite approach. Director Jordan Levy purchased $490,000 worth of shares in August 2024 when the stock was around $10, while director Jarrod Patten made consecutive purchases in September to increase his stake. More intriguing is the reaction during the March 2025 DeepSeek crisis when AI-related stocks plummeted. As shares fell to the $7-8 range, Jordan Levy immediately purchased 62,500 shares (about $500,000), and Eric Weiss also added 6,000 shares. Most recently in November, Eric Weiss bought 5,000 shares at $21.50, demonstrating continued confidence. This pattern suggests insiders are confident in the company's long-term value while employing tactical trading based on market cycles. Core Scientific faces real challenges. Q2 2025 revenue declined 44% year-over-year to $78.63 million, with persistent losses continuing. With $1.16 billion in debt and negative equity, financial structure vulnerabilities are evident. However, positive operating cash flow of $139 million and $453 million in cash reserves provide short-term liquidity relief. Yet the company's strategic value remains attractive. The 300MW additional IT capacity expansion in Denton, Texas is underway, representing hybrid infrastructure that can simultaneously support AI workloads and bitcoin mining. Stable revenue of approximately $290 million annually from CoreWeave contracts serves as an important buffer against volatile bitcoin mining income. AI infrastructure market recovery is also positive. After market sentiment was temporarily dampened by the DeepSeek crisis, the $40 billion AI infrastructure investment news involving BlackRock and Nvidia has revitalized the entire sector. Jefferies views this selloff as a buying opportunity, forecasting that corporate AI adoption will actually accelerate due to competitive pricing pressures. Key indicators investors should monitor include: positive signals such as quarterly colocation service revenue growth, mining profitability improvement from bitcoin price recovery, and continued insider buying. Warning signs include persistent quarterly revenue decline, operating cash flow deterioration, and debt repayment pressure. In an optimistic scenario, simultaneous AI infrastructure demand surge and bitcoin strength could establish a stable revenue base exceeding $500 million annually through expanded contracts with clients like CoreWeave. The base scenario involves gradual profitability improvement while maintaining current business structure, likely keeping share prices in the $15-20 range. The risk scenario combines AI bubble collapse with bitcoin weakness, potentially forcing additional fundraising or asset sales as debt repayment pressure materializes. Following the CoreWeave acquisition rejection, Core Scientific has chosen an independent growth path. Considering insiders' strategic trading patterns and structural growth trends in the AI infrastructure market, risk-reward appears attractive at current price levels. However, given high volatility and financial vulnerabilities, dollar-cost averaging or options strategies would be prudent considerations.