CoreWeave Post-IPO Lockup Period Ends: JPMorgan, Goldman Sachs, and Morgan Stanley Manage Multiple Block Share Sales

This information should not be construed as investment advice. The author does not have any active positions in the stocks discussed herein.

The Post-IPO Lockup Scenario for CoreWeave

CoreWeave appears to be facing a significant correction following its initial public offering (IPO), as an increasing number of block sales emerge in the market. This shift indicates that the company is navigating through a pivotal stage in its trading journey.

CoreWeave’s Unique Market Position

For readers unfamiliar with the company, CoreWeave is a prominent cloud-based provider of GPU-as-a-Service. The firm prides itself on offering early access to NVIDIA’s cutting-edge products at scale, facilitated by a strategic partnership with the GPU manufacturer across 33 AI data centers. By the end of this year, CoreWeave anticipates increasing its operational energy capacity from 470 MW to around 900 MW out of a total contracted power capacity of 2.2 GW.

Post-IPO Trading Dynamics

At the time of its public debut three months ago, only 11% of CoreWeave’s shares were made available for trading due to the high demand during the IPO. This limited availability also constrained the number of shares that could be sold short, particularly as the expenses related to borrowing shares were exceptionally high.

Fast forward to today, approximately 84% of CoreWeave’s Class A shares have now passed the lockup period, resulting in a notable increase in block sales. As reported by CNBC, JPMorgan has facilitated sales of around 5 to 6 million shares at a price close to $97 per share, while CoreWeave’s stock currently trades at $98.77. Furthermore, Morgan Stanley and Goldman Sachs have participated in similar sales, suggesting that the cumulative volume could potentially reach 18 million shares.

NVIDIA’s Strategic Support

NVIDIA has attempted to mitigate the impact of the lockup expiration by acquiring about 95, 100 shares in the recent quarter, raising its total ownership in CoreWeave to 24, 277, 573 shares (roughly 24.3 million).This stake currently holds an estimated value of $2.4 billion.

Notably, NVIDIA also served as the anchor investor for CoreWeave’s IPO. However, this relationship raises questions, as CoreWeave utilizes the capital from NVIDIA’s equity investments to purchase more GPUs, which it then offers as collateral for obtaining further financing.

Recent Financial Performance and Market Reaction

CoreWeave’s stock has experienced downward pressure following the release of its fiscal third-quarter earnings. While the company exceeded the revenue consensus of $1.08 billion by reporting $1.21 billion in sales, analysts expressed concerns regarding its $200 million operating income—an amount that was insufficient to offset the same amount in interest expenses incurred during the period.

Bank of America voiced disappointment over CoreWeave’s modest 4% increase in order backlogs, which exclude contributions from OpenAI. However, the company’s total order backlog has increased from $25.9 billion in March to $30.1 billion, bolstered significantly by $4 billion in new contracts from OpenAI.

Interestingly, despite raising its revenue outlook, CoreWeave has chosen to maintain its capital expenditure guidance for the current fiscal year.

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