A leading hedge-fund manager is betting that Elon Musk will be forced to buy Twitter.
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 percent 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 percent said “no.”
Then in July, 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.
The next week, Twitter was granted its wish of an expedited trial. Chancellor Kathaleen McCormick, the presiding judge, set a five-day trial for October. Many are considering this a win for the social-media company, including Einhorn and his Greenlight Capital hedge fund.
Greenlight is betting against Elon Musk in the ongoing battle with Twitter. Einhhorn revealed in a letter to partners that it’s built a Twitter stake at an average price of $37.24 a share. Einhorn’s firm believes Musk will be forced in court to go through with his acquisition at $54.20.
The letter argued that with $17 upside if Twitter wins in court and $17 downside if it doesn’t “we are getting 50-50 odds on something that should happen 95%+ of the time.”
“We think that the incentive of the Delaware Chancery Court, the pre-eminent and most respected business court in the nation, is to actually follow the law and apply it here,” the Greenlight letter reads. “If it lets Musk off the hook, it will invite many future buyer’s remorse suits. Cynical buyers might contract with targets and then use the threat of litigation and the resulting uncertainty to recut the deal.”
Einhorn is confident that Chancellor McCormick will follow the precedent and protect the sanctity of the court, thus making Musk uphold his deal and purchase the social media company.
