The most anticipated tech-related IPO in recent memory has turned into a dud of sorts. And at least two well-known hedge funds are feeling the impact.
The Friday offering incorporated many of the buzzwords needed to reignite the IPO market given CoreWeave’s role in artificial intelligence and the fact that Nvidia, with which CoreWeave has a close relationship, is a major investor. CoreWeave was built for Nvidia GPU-accelerated workloads, according to the company.
On Friday, CoreWeave offered 37.5 million shares at $40 a pop — 23.5 percent fewer shares than it had originally planned to sell, and well below the anticipated price range of $47 to $55 a share. Sure enough, the stock opened for trading at $39 and closed at $40.
“This was the first major IPO to test the market since the recent sell-off, and it didn’t deliver,” IPO specialist Renaissance Capital stated in a report. “A mountain of debt, an unclear moat, and a raft of related-party transactions weighed heavily on the deal. It’s the top AI hyperscaler now, but no one knows what the business will look like in five years, in an industry that reinvents itself every few months.”
As of year-end 2024, CoreWeave had $1.9 billion in revenue but reported a loss of $900 million.
Before the offering, Nvidia was one of five investors with at least a 5 percent ownership stake and nearly 18 million shares, according to a regulatory filing. The largest shareholder, however, was hedge fund Magnetar Capital, with almost 108 million shares. The hedge fund firm was founded in 2005 by Alec Litowitz, who relinquished control in 2022. It is now headed by David Snyderman.
Magnetar invested $50 million in CoreWeave in 2021. In May 2024, CoreWeave raised an additional $1.1 billion in a new financing round, led by Coatue Management with participation from Magnetar. The financing valued CoreWeave at $19 billion. Coatue, led by Tiger Cub Philippe Laffont, is not listed in the IPO regulatory filing as a 5 percent investor.
CoreWeave has taken on a considerable amount of debt in recent years, and the hedge funds have been major participants. For example, in 2023 CoreWeave said it had secured a $2.3 billion debt facility led by Blackstone and Magnetar, with participation from Coatue and a number of other major investment firms.
A year later, CoreWeave announced a $7.5 billion debt financing facility led by funds managed by Blackstone and participation from Magnetar and Coatue as well as several other major financial institutions.
