The fight is set: Elon Musk has bowed out of his $44 billion Twitter takeover, and, in response, the social media company is taking the world’s richest man to court (the Delaware Court of Chancery, in particular).
One bet-maker, the famed short-selling firm Hindenburg Research, has pegged Twitter as the favorite in the legal bout. Markets are already moving.
The Long and Short of It
Hindenburg on Wednesday revealed “a significant long position in shares of Twitter” with, what else, a Tweet. The firm’s blunt, character-limited message warned the social media company’s “complaint poses a credible threat to Musk’s empire.” Hindenburg founder Nate Anderson told the Financial Times that Musk “squandered much of his leverage, largely through misadvised and compulsive tweets,” and dismissed his pretext for terminating the deal — that Twitter has too many bot accounts.
Ironically, Anderson was in the Tesla CEO’s corner as recently as May, when his firm closed a short position on Twitter and said Musk held “all the cards” to reprice the deal from $54.20 per share down to around $48. Hindenberg’s sudden about-face adds to a history of feisty agitation, meticulous muckraking, and high-stakes short-selling:
- Last year, amid the wild SPAC boom, Hindenburg established short positions in DraftKings and electric-vehicle makers Lordstown Motors and Nikola. Nikola’s founder has since been charged with securities fraud, Lordstown’s CEO resigned amid an SEC investigation alleging the company misled investors, and DraftKing’s stock has plummeted over 80% since Hindenburg alleged the sports gambling firm has ties to the black market.
- “There are just so many outrageous companies,” Anderson, who first made a splash identifying a $1 billion fraud case perpetrated by the hedge fund Platinum Partners, told The New York Times last year. “Some of these companies we have looked at, they don’t have any revenues at all.”
Twitter’s stock jumped around 8% Wednesday after Hindenburg’s vote of confidence. Suffice to say for Musk and Twitter, the firm has a knack for spotting winners — and losers — when it sees them.