TLDR
- CoreWeave stock dropped 2.3% to $86.24 Monday after revealing a $2 billion convertible senior notes offering due 2031
- The company’s total debt stands at $14 billion with recent borrowing costs at 9% interest rates
- Credit default swap spreads surged 75% from 368 in early October to 643 by Friday, reflecting default risk concerns
- Initial purchasers can buy an additional $300 million in notes beyond the base offering
- Proceeds will fund capped call transactions and general corporate operations at the AI cloud computing company
CoreWeave shares closed at $86.24 Monday, declining 2.3% after the company announced plans for a $2 billion convertible senior notes offering. The debt issuance adds pressure to a stock already down 17% over the past month.
CoreWeave, Inc. Class A Common Stock, CRWV
The notes mature December 1, 2031, and will pay interest twice yearly in cash. Purchasers hold an option to buy up to $300 million more in notes. Interest rates and conversion details remain undisclosed until the offering prices Monday evening.
Shares hit a low of $84.12 in early trading, representing a 4.7% drop, before recovering slightly. CoreWeave operates as an AI cloud computing provider after pivoting from its original cryptocurrency mining business. The company now leases data center capacity designed for artificial intelligence computing tasks.
Default Risk Indicators Flash Warning Signs
Market data shows growing concern about CoreWeave’s ability to service its debt. Credit default swap spreads on the company’s five-year debt jumped from 368.395 on October 6 to 642.965 by Friday’s close. This 75% increase means investors are paying much more for default protection.
CoreWeave’s debt totaled $14 billion at the end of September. Recent unsecured senior notes carried a 9% interest rate. These borrowing costs create substantial quarterly interest expenses for the business.
The company has not commented ahead of pricing. CoreWeave previously explained it takes on debt to build computing infrastructure that customers have already committed to purchase under long-term contracts at guaranteed prices.
Note Structure and Shareholder Impact
The new convertible notes rank as senior, unsecured obligations. CoreWeave subsidiaries that guarantee the company’s existing 2030 and 2031 senior notes will also back this issuance. This places the new debt at equal priority with previous borrowings.
CoreWeave plans to use offering proceeds for capped call transactions. These instruments reduce the dilution existing shareholders experience when bondholders convert notes to stock. The company will buy additional capped calls if purchasers exercise their $300 million option.
Remaining funds will support general corporate purposes. CoreWeave did not provide specifics on how it will allocate this capital.
Competitor stocks performed better Monday. Nebius Group shares rose 2.3% while IREN climbed 3.7%. Both companies compete in the neocloud infrastructure market serving AI applications.
Conversion Terms Await Final Pricing
Convertible note holders gain the right to exchange debt for CoreWeave shares at specific prices. The conversion rate won’t be set until pricing concludes. This rate determines how many new shares enter circulation if all notes convert to equity.
CoreWeave continues building out data center capacity to meet customer demand for AI computing power. The business model centers on multi-year contracts that provide predictable revenue streams. Management argues these commitments justify the expanding debt load.
Trading volume spiked Monday as investors reacted to the offering announcement. The stock recovered from session lows but remained in negative territory. CoreWeave has consistently used debt financing to fund its infrastructure expansion plans.
The notes will be offered through private placement rather than public markets. Initial purchasers get first access with their option for additional notes.
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