CoreWeave (CRWV) stock sank roughly 11% Tuesday amid rapid-fire sales by insiders after the expiration of the AI data center company’s lockup period following its IPO.
Insiders including CEO Michael Intrator and hedge fund Magnetar have sold over 7 million shares of CoreWeave since its lockup period ended in August, according to Bloomberg data compiling company filings. Lockup periods prevent insiders — directors, senior officers, or investors who own more than 10% of a firm’s voting shares — from selling their stock in a company for a period after it goes public to prevent a sudden drop in share price.
“Previous CRWV shareholders have been selling at a very rapid pace following the unlocking of shares,” DA Davidson analyst Gil Luria, who holds a Sell rating on CoreWeave, told Yahoo Finance. He added that the pace of the selling, along with how quickly it’s occurring after the lockup deadline, indicates the insiders may think the stock price is overvalued.
CoreWeave went public in March for $40 per share, and its stock rocketed to a high above $183 in late June in what was viewed as a victory for the AI trade. The company rents capacity in its data centers, equipped with its massive store of Nvidia AI chips, to Big Tech firms such as Microsoft (MSFT) and Meta (META) as well as OpenAI.
Shares hovered around $92 Tuesday.
Hedgeye Risk Management analyst Felix Wang, who holds a short position on the stock, said “the lock-up expiration was brutal given [the] stock was a bubble” and noted that the AI trade is “losing some momentum.” AI-linked stocks have suffered amid investor fears of a broader bubble related to the technology and as AI stalwart Nvidia’s latest earnings fell short of investors’ expectations.
Luria and Wang previously told Yahoo Finance that while they’re optimistic about the AI trade, they see CoreWeave as a risky bet, in part due to its mounting debt borrowed at high interest rates.
Shares fell in mid-August after the company reported a disappointing quarterly outlook for its operating income and a mounting interest expense, indicating the company isn’t generating enough profit to pay debt holders.
The rapid descent in CoreWeave’s share price over the past two months adds some uncertainty to the company’s acquisition of Core Scientific (CORZ), the analysts said. CoreWeave announced plans to acquire the data center provider in July in an all-stock transaction valued at $9 billion. But with its shares’ value deteriorating, CoreWeave’s stock offering to Core Scientific is worth a lot less.
“ Core Scientific accepted an offer at one price, and now the price is very materially different,” said Luria. “ Usually when a company makes an all-share offer, the share price doesn’t change that much between when the deal’s announced and when the deal closes.”
