The Austin Powers steamroller: How to trade CoreWeave's slow moving crisis
After a 27.5% drop from last Friday's close to this Thursday morning's 52-week lows, followed by a 17% rebound, equity traders holding CoreWeave are dazed.
TL;DR
- CoreWeave's stock experienced a 27.5% drop followed by a 17% rebound, leaving equity investors uncertain.
- The company has accumulated $51.6 billion in debt with zero historical profitability.
- Credit markets show distress with bond prices falling and Credit Default Swaps (CDS) spiking.
- The company faces significant negative free cash flow projections.
- Equity sentiment is heavily divided, with a split sell-side outlook and high short interest.
- High-profile investors like ARK Investment and Nvidia CEO Jensen Huang have shown support for CoreWeave.
- A proposed trading strategy involves a November/January Call Diagonal options spread.