Sci-Tech
Monday May 09 2022
By
Reuters

Musk's $44bn Twitter deal at risk of being repriced lower: Hindenburg

By
Reuters
Elon Musks Twitter profile is seen on a smartphone placed on printed Twitter logos in this picture illustration taken April 28, 2022. — Reuters/File
Elon Musk's Twitter profile is seen on a smartphone placed on printed Twitter logos in this picture illustration taken April 28, 2022. — Reuters/File

Short-seller Hindenburg Research warned on Monday that Elon Musk's $44 billion offer to take Twitter Inc private could get repriced lower if the world's richest person walked away from the deal.

"Musk holds all the cards here," Hindenburg, which has a short position on Twitter, said in a report. "If Elon Musk's bid for Twitter disappeared tomorrow, Twitter's equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower."

Shares of the social media platform were down as much as 4% amid a broader market decline and touched $47.76, their lowest level since Musk made his $54.20 per share offer in April, calling it "best and final".

Twitter declined to comment.

"Interesting. Don't forget to look on the bright side of life sometimes!" Musk tweeted in a light-hearted response, to which the short-seller said it expects Tesla shareholders will thank him if the deal is done at a "more reasonable price".

Hindenburg said the deal has seen a number of developments, from financing to board approval, which could have weakened Twitter's position.

"We are supportive of Musk's efforts to take Twitter private and see a significant chance the deal will close at a lower price," Hindenburg said.

The short-seller said Tesla Inc chief executive could walk away from paying the $1 billion breakup fee and has incredible leverage to renegotiate if he chooses to.

Last month, Twitter secured a $44-billion cash deal to sell itself to Musk, who received over $7 billion in funding from high-profile investors, including Oracle's co-founder Larry Ellison and Sequoia Capital. 

Angelo Zino, an analyst at CFRA Research, said there is a high probability that the deal would close at the stated offer price, except if Musk has a change of heart.