CASE STUDY
Building better outcomes
Shareholder activism leads to strategic M&A pivot
Read time: 9 min
When digital infrastructure company Core Scientific announced that it would be acquired by AI cloud-computing company CoreWeave for $9 billion, it raised red flags for Two Seas Capital, a hedge fund that held a significant position (6.5%) in Core Scientific.
Following a thorough analysis of the transaction and the circumstances surrounding the deal, Two Seas recognized that the deal significantly undervalued Core Scientific and failed to protect shareholders.
Together with McDermott, Two Seas determined that the Core Scientific board had engaged in a flawed sale process, that the all-stock deal consideration – with no collar or price protections – exposed Core Scientific shareholders to significant risk, and that headline deal price of $20.40 per share was inadequate.
Two Seas concluded that, in the interest of protecting Core Scientific shareholders, the deal should not proceed on its terms.
Two Seas needed to rally investors to defeat the deal in a fast-approaching vote. Although the fund regularly explores unique legal angles to drive business outcomes and investment returns, it had never previously engaged in traditional shareholder activism.
Two Seas called on our market-leading shareholder activism team at McDermott to evaluate the legal and strategic avenues available to them.
The engagement unfolded in phases:
We reviewed the transaction documents to understand all aspects of the deal, including the deal’s closing conditions and termination covenants. We identified that the only viable path forward was for Core Scientific’s shareholders to vote against the deal, because Core Scientific’s board lacked a desirable “out” to terminate the deal.
On October 30, 2025, Core Scientific shareholders voted overwhelmingly against the deal. Shortly thereafter, the companies announced that the transaction had been formally terminated.
This was a historically successful outcome for Two Seas: Only 6.8% of Core Scientific’s shareholders voted for the deal, making it the least-supported M&A deal of more than $1 billion in the past 10 years.
The shareholder vote also sent a message to the Core Scientific board that change was necessary. Following the shareholder vote, Two Seas demanded that Core Scientific bring in new board members to better govern the company and create long-term value. This led to a months-long dialogue, and on February 18, 2026, Two Seas and Core Scientific entered into a cooperation agreement under which Core Scientific agreed to appoint three new directors to its board. Core Scientific also agreed to reimburse Two Seas for a substantial amount of Two Seas’ expenses incurred in connection with its advocacy on behalf of shareholders.
This settlement and prior merger proxy campaign sent a signal to boards at other companies to proactively engage with shareholders to better understand shareholders’ sentiment over corporate board decisions on make-or-break transactions. Two Seas demonstrated to the market that shareholders will scrutinize deal processes, challenge inadequate valuations, and reject agreements lacking appropriate price protections.
Two Seas’ campaign proves that even first-time activists, armed with sound analysis and experienced strategic advisors, can achieve transformative outcomes. McDermott’s guidance proved instrumental, helping a client new to activism navigate the process and protect billions of dollars in shareholder value.
