Core Scientific: Of CORZ It's Not Arbitrage, But The CVR Is Very Compelling

Kevin Mak, CFA
1.41K Followers

Summary

  • Core Scientific, Inc. has an undervalued contingent rights vehicle, or CVR, that resembles a put option with unique features.
  • The CVR trades at a significant discount to its fair value due to its complexity and illiquidity.
  • The CVR has a strike price of $5.02, a 3-year maturity, and annual settlements capped at $0.84 per year.

Blackboard full of equations

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Introduction

Core Scientific, Inc. (NASDAQ:CORZ) has an over-the-counter traded contingent rights vehicle (aka a "CVR") that was distributed to debt holders during the Chapter 11 bankruptcy process. As written, the CVR is a strange security, but when one parses

This article was written by

1.41K Followers
Kevin is the Director of the Realtime Analysis and Investment Lab (RAIL) at the Stanford Graduate School of Business.  In addition, he is a lecturer and teaches MBA and undergraduate courses on trading and investing.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of CORZ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Long CORZR, Long CORZ, Short CORZ Calls

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