Twitter shares rose on Wednesday after a hedge fund announced it had taken a stake in the company based on its “strong argument” against Elon Musk for withdrawing from his $44 billion takeover bid.
Shares of the social media platform, which sued on Tuesday to force the moody billionaire to stick to the deal, rose around eight percent in trading.
Hedge fund Hindenburg Research has taken a “significant” stake in Twitter, but it’s below the 5% threshold required for reporting to the US Securities and Exchange Commission, the fund’s founder, Nathan Anderson, confirmed to AFP .
Anderson said it was the first time Hindenburg had publicly announced the stock purchase.
“Twitter is suing to enforce the entire $44 billion merger price and they have strong arguments,” Anderson said.
The lawsuit, filed in the US state of Delaware, is urging the court to order the Tesla boss to close its deal to buy Twitter, arguing that no monetary penalty can repair the damage he caused.
After weeks of threats, Musk pulled the plug on the deal last week, accusing Twitter of “misleading” statements about the number of fake accounts, according to a letter from his attorneys contained in a US securities filing.
“Twitter’s bot issue is perhaps the worst excuse Musk could have used to end the deal as it was clearly and publicly a reason he entered into the deal in the first place,” Anderson added.
A few days after making a bid to buy the company in April, Musk said that once the acquisition was complete, he would “beat the spam bots or die trying!”
For Anderson, Twitter has “more leverage” given the potential threat to Musk’s empire in the event of an outright victory in court.
Wedbush Securities analyst Dan Ives said in a note that Wall Street “interprets the Twitter lawsuit filed against Musk last night as ‘extremely compelling.'”
“The stock now calculates a significant possibility that Musk will eventually have to pay Twitter a settlement well in excess of $1 billion,” Ives said, citing the separation fee in the original agreement between the entrepreneur and Twitter.
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