Thursday, May 26, 2022

Hindenburg Research gloats amid hold

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A Twitter short seller gloated on Friday after Elon Musk pumped the breaks on his $ 44 billion bid to buy out the social media site with a bizarre tweet that claimed negotiations were “on hold.”

Short-seller Hindenburg Research had written Monday that Musk “holds all the cards” in the deal and could threaten to walk away in order to make the company board agree to a lower purchase price.

“Interesting,” a Musk responded at the time. “Don’t forget to look on the bright side of life sometimes!”

Then on Friday morning, Musk revealed that the deal was “temporarily on hold” due to concerns about “spam / fake accounts” – then insisted hours later that he was “still committed” to the buyout.

Hindenburg Research’s founder, Nate Anderson, coyly claimed victory on Friday after Musk’s waffling sent Twitter’s share price plummeting as much as a quarter early Friday before it partially recovered.

“I’m looking on the bright side of life this morning,” Anderson wrote.

Twitter shares were trading at $ 41.50 mid-day on Friday, which is 8% lower than the previous day and nearly 25% below Musk’s marijuana-themed buyout price of $ 54.20 a share – indicating Wall Street is skeptical the deal will go through under its current terms, if at all.

Hindenburg has a record of writing scathing take-downs of what it believes to be over-rated tech companies, including electric vehicles makers Nikola and Lordstown Motors, as well as controversial health insurer Clover Health.

When Hindenburg released its initial report on Twitter this Monday, the investment group revealed it had taken a short position in the company, meaning that it likely profited from Friday’s plunge.

“If Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels,” Hindenburg wrote Monday. “Consequently, we see a significant risk that the deal gets repriced lower.”

Elon Musk said he put his $ 44 billion Twitter bid “on hold” Friday.
Hindenburg Research
Hindenburg Research has a history of publishing takedowns on what it believes are overvalued tech firms.

“We are supportive of Musk’s efforts to take Twitter private and see a significant chance the deal will close at a lower price,” Hindenburg added, arguing that the deal has seen a number of developments – including financing and board approval – which could have weakened the company’s position.

Hindenburg said Musk could walk away paying the $ 1 billion breakup fee and has leverage to renegotiate if he chooses to.

Wedbush Securities managing director Dan Ives said Friday’s “Twitter circus show” means Wall Street investors believe Musk could be “negotiating for a lower deal price.”

Even ex-President Donald Trump appeared to echo Hindenburg’s position on Friday, writing, “There is no way Elon Musk is going to buy Twitter at such a ridiculous price.”

“If it weren’t for the ridiculous Billion Dollar breakup fee, Elon would have already been long gone,” Trump added in a post on his own Twitter alternative website, Truth Social.

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