TLDR
- CoreWeave announced a $2 billion convertible senior notes offering due 2031, with an option for buyers to purchase an additional $300 million
- Shares dropped 4.7% in early trading Monday, extending a 17% decline over the past month on debt concerns
- The company’s total debt load stood at $14 billion at the end of September, with recent unsecured notes priced at 9% interest
- Credit default swap spreads on CoreWeave widened from 368 on October 6 to 643 by Friday’s close, showing increased investor concern about default risk
- CoreWeave will use proceeds for capped call transactions to reduce share dilution and general corporate purposes
CoreWeave stock closed down 2.3% at $86.24 on Monday after the AI cloud computing company announced plans to issue $2 billion in convertible senior notes. The offering represents another layer of debt for a company already carrying $14 billion in obligations.
CoreWeave, Inc. Class A Common Stock, CRWV
The convertible senior notes will mature on December 1, 2031, and pay interest twice per year in cash. Initial purchasers will have the option to buy up to an additional $300 million in notes. The company has not yet disclosed the interest rate or conversion terms, which will be set when the offering prices Monday evening.
Shares dropped as much as 4.7% to $84.12 in early trading before recovering slightly. The stock has fallen 17% over the past month as investors focus more closely on the company’s debt situation.
CoreWeave started as a cryptocurrency mining operation before shifting its computing capacity to handle artificial intelligence workloads. The company leases data centers specifically designed for AI computing tasks.
Rising Default Insurance Costs Signal Investor Concern
Credit default swap spreads on CoreWeave’s five-year debt have jumped from 368.395 on October 6 to 642.965 by Friday’s close, according to Bloomberg data. The widening spreads mean investors are paying more for insurance against potential default. These swaps can be volatile due to thin trading volumes.
The company’s most recent unsecured senior notes carried a 9% interest rate. High interest expenses eat into the company’s financial performance each quarter. At the end of September, CoreWeave’s debt load totaled $14 billion.
CoreWeave declined to provide additional details before the offering prices. The company has maintained that it takes on debt to build computing capacity that customers have already committed to purchase at guaranteed prices.
The new notes will be senior, unsecured obligations guaranteed by subsidiaries that also back the company’s existing 2030 and 2031 senior notes. This structure places the new debt at the same level as previous borrowings in the capital stack.
Proceeds Aimed at Managing Dilution
CoreWeave plans to use some proceeds to fund capped call transactions. These financial instruments help reduce the dilution existing shareholders face when convertible notes eventually convert to stock. The company will purchase additional capped calls if buyers exercise their option to purchase the extra $300 million in notes.
The remaining proceeds will go toward general corporate purposes. The company did not specify exact uses for this portion of the funds.
Other companies in the neocloud space showed different performance Monday. Nebius Group shares rose 2.3% while IREN jumped 3.7%. These companies also focus on providing computing infrastructure for AI applications.
CoreWeave competes in a market where demand for AI computing power continues to grow. The company’s business model relies on long-term contracts with customers who need guaranteed access to computing resources.
The convertible notes offering follows a pattern of debt issuance as CoreWeave builds out its infrastructure. The company has consistently added to its debt load to fund expansion of its data center capacity.
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