The bets are coming in on the battle for Twitter and right now they’re against Elon Musk.
- Investors are putting their money down on whether the billionaire entrepreneur will be forced to complete his purchase of Twitter.
- Many hedge funds are betting against Musk and think the Tesla CEO will be forced to complete his $44-billion deal to buy the social-media platform.
- Hedge funds including David Einhorn’s Greenlight Capital, and Pentwater Capital Management are betting that Musk won’t get his way and that he will have to complete the deal at perhaps the full offer price of $54.20 per share.
Why it’s news
Musk has been trying to abandon his deal to buy Twitter. Things started to look good for the billionaire, but recently people haven’t seemed hopeful for him.
Einhorn, whose firm bought Twitter shares at an average price of $37.24, dismissed speculation that the court would rule in Musk’s favor to avoid embarrassment should the man commanding a net worth of more than $250 billion simply choose to ignore its decision, according to Bloomberg.
“We think that the incentive of the Delaware Chancery Court, the preeminent and most respected business court in the nation, is to actually follow the law and apply it here,” says Einhorn.
Pentwater, led by Matthew Halbower, bought more than 18 million Twitter shares in the second quarter, making his firm the seventh-biggest owner with a 2.4% stake is also begging against Musk and thinks the court will force him to complete the merger.
The market seems to be agreeing with them.
On Tuesday, September 13, when U.S. equity markets plunged the most in more than two years, Twitter shareholders voted to approve the merger—and the stock was the second-best performer in the S&P 500, gaining 0.8% to $41.74. While it hasn’t closed above $44.50 since Musk first suggested in May that he might renege, some analysts and investors, including Einhorn, have said the stock would tumble to $20 if the deal falls apart, according to Bloomberg.
Backing up a bit
The timeline between Elon Musk and Twitter is a lengthy one.
In April, Elon Musk announced that he held a 9.2% stake in Twitter, which made him the social-media company’s largest shareholder. Twitter’s stock price soared 25% after the announcement.
Later that month, the billionaire entrepreneur offered to buy all of Twitter at $54.20 per share—equaling about $44 billion. He said he originally invested in the platform because he believes it is failing in its potential to be the leading platform for free speech around the globe. In fact, he asked his 2 million followers if Twitter adhered to principles of free speech, and 70% said “no.”
Last month, Musk decided to back out of the deal, claiming there were too many fake accounts on the platform. Twitter has since sued Musk in Delaware Court of Chancery to complete the deal and requested the trial to take place in September. Musk, on the other hand, wanted to delay the trial until February 2023, stating that a case of this size takes time to prepare. Twitter was granted its wish of an expedited trial, with Chancellor Kathaleen McCormick, the presiding judge, setting a five-day trial for October.
Musk then countersued Twitter, stating his reason for the termination was due to Twitter not being upfront about the number of fake accounts on the platform.
Then, Elon Musk and his legal team subpoenaed Twitter’s founder and former CEO Jack Dorsey, to get him to release documents that provide accurate information on bots and spam accounts on the social-media platform and now these documents have come out from Zatko and Musk and his lawyers have subpoenaed him as well.
The trial is set for October, unless it can be settled before that date approaches.