Shares in Twitter jumped 8 percent after Hindenburg Research — best known as a short seller — said it had amassed a “significant” stake in the social media company, which is embroiled in a legal battle with Elon Musk.
The move comes after Tesla’s CEO revealed last week that he wanted out of a $44 billion deal to acquire Twitter, prompting the San Francisco-based group to file a lawsuit in an attempt to force him to complete the deal.
“Musk has squandered much of his influence, largely through ill-advised and intrusive tweets,” Hindenburg founder Nate Anderson said in an interview with the Financial Times. “Twitter has a strong case.”
The New York-based firm, which is best known for betting against companies, closed out its short position in the social media platform in May. At the time, Hindenburg said there was a significant risk that the deal between Twitter and Musk could be repriced below the $54.20 per share originally agreed upon.
“We originally published our brief when the stock price was around $48. We closed that and it was a very good short. Now we think that makes for a fascinating long run,” Anderson said.
Twitter declined to comment.
We have accumulated a significant long position in Twitter stock.
The Twitter outcry poses a real threat to Musk’s empire.
— Hindenburg Research (@HindenburgRes) July 13, 2022
The news comes a day after Twitter filed a highly worded lawsuit against Musk in Delaware Chancery Court in an attempt to force him to honor his agreement to buy the social media company.
On Friday, Musk said he planned to back out of the deal, claiming Twitter violated the merger agreement by not sharing enough information about fake accounts.
Twitter has dismissed Musk’s claims as “bad faith” to get out of a high-priced deal during a market downturn and claims it was Musk who repeatedly violated the merger agreement.
In particular, Twitter’s lawsuit accused Musk of repeatedly breaching his duty not to disparage the company and its employees, presenting images of multiple tweets from the Tesla CEO in which he hinted at or joked about the deal, or mocked Twitter and its guide.
“Instead of bearing the cost of the market decline as required by the merger agreement, Musk wants to pass it on to Twitter shareholders,” the complaint said.
“It follows the disregard he has shown for the company, which one would expect Musk, as its future CEO, to defend. Since signing the merger agreement, Musk has repeatedly disparaged Twitter and the deal, creating business risk for Twitter and pressure on its stock price.”
Anderson noted that Musk initially said he was pursuing the deal in part to help address the number of bots on Twitter’s platform, a point Twitter also made in its complaint.
The fake accounts were “the worst pretext Musk could have chosen to terminate the deal,” Anderson said, adding, “It was a clear and very public reason for him to enter into the agreement in the first place.”
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