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CoreWeave stock is experiencing a significant post-IPO lockup correction, as evidenced by the large number of block sales now occurring in the market.
CoreWeave is a major cloud-based GPU-as-a-Service provider that offers early access to NVIDIA’s latest products at scale due to its unique partnership with the GPU giant across 33 AI data centers.
By the end of the year, CoreWeave plans to energize around 900MW (compared to 470MW today) out of its 2.2GW contracted power capacity.
When CoreWeave went public three months ago in a high-stakes IPO, only about 11% of its share float was available for trading. This limited the number of shares that could be sold short due to the high cost of borrowing shares.
Now, approximately 84% of CoreWeave’s Class A shares have exited their lockup period, leading to several large block sales. For example, JPMorgan handled block sales of around 5 to 6 million shares at a price of about $97 per share today, with Goldman Sachs and Morgan Stanley handling similar volumes, potentially totaling up to 18 million shares.
NVIDIA attempted to mitigate the impact on CoreWeave by purchasing around 95,100 shares during the just-concluded quarter. This brings its total stake in CoreWeave to approximately 24.27 million shares (worth about $2.4 billion at current prices).
As a significant investor and anchor for CoreWeave’s IPO, NVIDIA plays a pivotal role. However, this relationship is controversial because the money CoreWeave receives from NVIDIA’s equity investments is used to purchase more GPUs from NVIDIA, which are then pledged as collateral to secure additional debt financing.
CoreWeave shares have faced pressure since the company disclosed its earnings for its fiscal third quarter a few days ago. Despite beating revenue estimates with $1.21 billion in quarterly sales, analysts pointed out that CoreWeave’s operating income of $200 million was insufficient to cover its $200 million in interest expenses.
Bank of America was disappointed by CoreWeave’s 4% quarter-over-quarter increase in order backlogs (excluding OpenAI). The company’s total order backlog has risen to $30.1 billion from $25.9 billion in March, largely due to an additional $4 billion in contracts from OpenAI.
Interestingly, despite increasing revenue guidance, CoreWeave has not changed its capital expenditure (CapEx) guidance for the ongoing fiscal year.
