| Over 300 organizations rely on The Information for exclusive insights into public and private companies, including in-depth analysis of the ways in which tech moves markets. Click here to contact our corporate and enterprise team to learn more. Welcome back! The most dangerous game in artificial intelligence investing right now is CoreWeave. Retail traders have helped bid up its stock price by 277% since its lackluster initial public offering, powering its market valuation from $23 billion to a remarkable $72 billion in two months. "It's the most incredible thing I've ever seen," one hedge fund manager told me. "It's coming to an end. I just don't know when." Start with the circumstances around the IPO. Skepticism was deep among Wall Street investors due to CoreWeave's heavy debt load, high customer concentration, and executive share sales. It got so bad that when CoreWeave's investment bankers color coded the news headlines leading up to the IPO (red for negative, green for positive), their pages were deep with red. Tariffs, DeepSeek and other bearish factors didn't help, either. The skepticism forced bankers to dig a protective moat around the stock. They shrank the size of the deal and allocated the stock largely to investors that already owned shares, namely Nvidia and Fidelity. Bankers concentrated the deal with investors who would hold onto the stock, rather than selling it or lending it out to short sellers. The result was the emergence of a big AI stock in the public markets with relatively few big institutional investors holding the stock. They're now watching as small investors drive up its shares. The company has been the No. 2 most traded stock in volume since May 15, the day after CoreWeave reported strong earnings, according to the trading site Public.com. Some days, it's been No. 1. Traders have put four times as many bullish bets on the stock—call options—than they have bearish bets, or put options, according to Public. Wall Street, meanwhile, is betting it will fall. About 30% of the shares available to trade have been shorted, according to financial data firm S3 Partners. Meanwhile, financing rates for short sellers to borrow the stock "have been steadily rising due to the continuous demand to short since listing and lack of overall borrow liquidity," said S3 Partners' Matthew Unterman in an email. So far, going short CoreWeave has been a very bad decision. Wall Street investors largely are counting on the company's stock price to fall back to earth, particularly when more shares hit the market at the end of the summer. That's when executives, employees and existing investors are released from their customary post-IPO stock-selling restrictions. But I'm not so sure if that will happen. Will retail investors get washed out or keep driving up the stock? This wouldn't be the first time that happened in the past few years. Or will institutional investors jump in to avoid falling behind the market in the coming months, giving CoreWeave more room to run? The answer isn't just a parlor game for traders; CoreWeave's success has real implications for the development of AI, as well as the buildout of data centers that power it. Another reason why the stock may stay up is CoreWeave's unusual group of shareholders. The company's largest investors include Magnetar Capital, a firm full of savvy traders. It surely will sell some, but not all at once. CoreWeave's cofounders, who are commodities traders by training, have already sold a half-billion dollars worth of stock, so they have walking around money and might hold on longer than people think. Other shareholders include: Nvidia, its largest supplier and one of its largest customers; OpenAI, another customer; and long-term investors like Fidelity. Those three big investors, along with Magnetar and the three co-founders, combine to own more than 60% of the company's outstanding stock. The point is: This might not play out as badly as Wall Street investors assume. CoreWeave's stock run-up also will make it easier for the company to do what it really needs: raise a lot more money. There's nothing better than selling equity at crazy high valuations, especially for a company carrying billions in debt. Tesla, the king of crazy high valuations, sold $5 billion in stock in 2020 after a six-fold increase in its shares. This reality is forcing caution among even Wall Street analysts who have seen CoreWeave's stock rise as ridiculous. Analysts at MoffettNathanson, the equity research outfit, wrote in a note to clients last week: "What started as a bit of a joke within MoffettNathanson has turned out to be a prescient forecasting tool. 'Why is CoreWeave up [enter large percentage]?' 'Oh, it's [enter day of the week], and it goes up that much on every [enter day of the week].'" But the firm kept a neutral rating on the stock, rather than urging investors to sell. "The rich stock price affords CoreWeave with opportunities to create value through the issuance of equity-linked securities or M&A, which strikes us as a distinct possibility," they wrote. They added that "attempting to trade this move appears exceptionally dangerous." | 
0 comentários:
Postar um comentário