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CoreWeave stock is heading for a sizable post-IPO lockup correction, judging from the quantum of block sales that are now hitting the tape.
For the benefit of those who might not be aware, CoreWeave is a major cloud-based GPU-as-a-Service provider that distinguishes itself by providing early access to NVIDIA's latest products, and that too, at scale, thanks to its unique partnership with the GPU giant across its 33 AI data centers.
Do note that CoreWeave plans to energize around 900MW (vs. just 470MW today) out of its 2.2GW contracted power capacity by the end of the year.
Just 11 percent of CoreWeave's share float was available for trading when the company went public around three months back in a high-stakes IPO. This paradigm also limited the number of shares that could be sold short, owing to the sky-high cost for borrowing shares.
Today, however, around 84 percent of CoreWeave's Class A shares have exited their lockup period, leading to several share block sales.
For instance, according to CNBC, JPMorgan alone has handled block sales of around 5 to 6 million CoreWeave shares today at a price of around $97 per share. For context, the stock is currently trading at $98.77. Morgan Stanley and Goldman Sachs have handled similar block sale volumes, with the cumulative total potentially reaching 18 million shares (at the top end of the given range).
Of course, NVIDIA tried to cushion the inevitable blow to CoreWeave in the aftermath of its lockup expiration by scooping up around 95,100 shares during the just-concluded quarter, bringing its total stake in CoreWeave to 24,277,573 (24.27 million) shares. At current prices, this stake is worth around $2.4 billion.
As our regular readers would know, NVIDIA also acted as the anchor investor for CoreWeave's IPO. Of course, this circular relationship is not without its fair share of controversy. After all, the money that CoreWeave gets from NVIDIA's equity investments is then deployed by CoreWeave to buy more GPUs from NVIDIA. What's more, the company also pledges these GPUs as collateral to acquire additional debt financing.
Meanwhile, CoreWeave shares have been under pressure ever since the company disclosed its earnings for its fiscal third quarter a few days back.
While the company easily beat the consensus revenue estimate of $1.08 billion by reporting quarterly sales of $1.21 billion, analysts were quick to flag CoreWeave's $200 million in operating income, which was insufficient to cover the $200 million in interest expense that it incurred during the quarter.
Bank of America was disappointed by CoreWeave's 4 percent quarter-over-quarter jump in order backlogs (excluding OpenAI). Do note that the company's total order backlog has now climbed to $30.1 billion from $25.9 billion in March, largely due to $4 billion in additional contracts from OpenAI.
Interestingly, CoreWeave has not changed its CapEx guidance for the ongoing fiscal year despite hiking revenue guidance.
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