This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
The prolific short-seller Hindenburg Research is paradoxically acting as a potent tailwind for Twitter shares currently despite Elon Musk’s best efforts to wreck the social media giant’s stock price by attempting to walk away from the takeover deal.
As a refresher, back in May, Hindenburg Research had disclosed a short position vis-à-vis Twitter, citing “nosebleed” leverage, overvalued offer price, and “undue pressure” on Tesla shares resulting from Musk’s multi-billion-dollar agreement to take the social media giant private.
However, as Twitter’s share price continued to decline amid stalling tactics by the CEO of Tesla, Hindenburg Research soon closed out its short position at a profit.
Bear in mind that in early July, Elon Musk officially walked away from the agreement to acquire Twitter after identifying Twitter’s failure to satisfactorily prove the fidelity of its Monthly Active Users (MAUs) metric as a major stumbling block. Bear in mind that Twitter has consistently maintained that less than 5 percent of the active accounts on the platform could be defined as bots or fake accounts, a claim that has been declared dubious by Musk on several occasions.
Musk also took exception to Twitter’s recent decision to fire two key executives as well as lay off a third of its talent acquisition team.
For its part, Twitter has continued to claim that the quantum of bots on the platform is not a material legal impediment to the consummation of the takeover deal, as Elon Musk had waived due diligence during the negotiations phase.
The 5-day legal showdown between Elon Musk and Twitter is now expected to take place at the Delaware Court of Chancery in October, where the social media giant hopes to compel Musk to consummate his buyout agreement via a suit for specific performance.
This brings us to the crux of the matter. Hindenburg Research had disclosed a long position on Twitter on the 13th of July, just ahead of the announcement of the expedited trial date for the legal showdown between Twitter and Elon Musk.
We have accumulated a significant long position in shares of Twitter.
Twitter’s complaint poses a credible threat to Musk’s empire.
— Hindenburg Research (@HindenburgRes) July 13, 2022
Relative to Twitter’s closing price of $34.06 on the 12th of July, the stock is currently up over 15 percent. However, given Musk’s persistent efforts to wreck the social media platform’s stock price, many investors continued to wonder whether Hindenburg Research is sticking to its proverbial guns on this matter.
Well, the question was laid to rest a few hours back when Hindenburg’s Nate Anderson tweeted that the firm was still long on Twitter despite the ongoing “circus” show:
I'm expecting it will be a circus. We are still long
— Nate Anderson (@ClarityToast) July 26, 2022
Bear in mind that a lot of analysts expect this matter to eventually head toward a settlement. Nonetheless, substantial uncertainties persist. In this environment, it remains to be seen for how long Hindenburg Research continues to act as a tailwind for the stock via its uncharacteristic long position.