Short-seller Hindenburg Research makes surprising new buy: Twitter

·Executive Editor

Updated Wed, Jul 13, 2022, 8:54 AM2 min read

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Notorious short-seller research firm Hindenburg Research — credited with exposing recent misdeeds at EV makers Nikola (NKLA) and Lordstown (RIDE) — is taking a different approach to Twitter (TWTR).

On Wednesday, the firm disclosed in a tweet it has taken a long position — or bet on shares going higher, not lower — in Twitter as the company prepares for a potentially lengthy legal battle with Tesla (TSLA) CEO Elon Musk in Delaware courts.

Hindenburg Research founder Nathan Anderson tells Yahoo Finance the stake is less than 5% of Twitter's outstanding shares. The bet looks to be one made on the premise Elon Musk will be forced by the courts to buy Twitter at the agreed upon $54.20 a share offer price.

"There is a common misconception that only $1 billion is on the line," Anderson told Yahoo Finance. "Twitter is suing to enforce the entire $44 billion merger price, and they have a strong case. Musk has squandered much of his leverage, largely through ill-advised compulsive tweets."

Twitter shares rose 6% to $36.26 on the Hindenburg disclosure.

In a suit filed Tuesday in Delaware, Twitter contends that the world's richest person Musk made his offer to buy the company “without seeking any representation from Twitter regarding its estimates of spam or false accounts.”

Still, the company argues, it furnished Musk and his team with ample information — as required by the parties’ merger agreement — regarding the prevalence of bots on the platform. Twitter’s lawyers added that Musk has long been aware of the company’s publicly stated methodology for estimating fake accounts, based on Twitter’s regulatory filings.

Twitter chairman Bret Taylor tweeted the suit aims to "hold Elon Musk accountable to his contractual obligations."

Added Hindenburg's Anderson to Yahoo Finance: "From a risk reward perspective Twitter makes for a compelling long at these levels."