Hindenburg said Twitter’s share would drop 50% if Musk walks away from the deal
Twitter’s position has deteriorated since Musk’s proposal due to overall weak market and lower than expected earnings report
Short-seller Hindenburg Research on Monday warned that Elon Musk's $44-billion offer to take Twitter Inc (NYSE: TWTR) private could get repriced lower if the billionaire plans to walk away from the deal.
"Musk holds all the cards here," the firm 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."
Hindenburg said it has a short position on Twitter.
Shares of the social media platform closed at $48.03 on Monday, down as much as 3.5% amid a broader market decline and hit $47.62, their lowest level since Musk made his $54.20 per share offer in April.
"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 the deal has seen several developments since Musk’s proposal, from overall weak market, lower than expected quarterly earnings report, financing to board approval, which could have deteriorated the company's position.
Hindenburg said the billionaire could walk away from the deal by paying the $1 billion breakup fee and has leverage to renegotiate if he plans.
“I don’t care about the economics at all,” Musk has earlier said, regarding the transaction, leading many to believe the current offer price is set in stone, as Twitter secured a $44-billion cash deal last month to sell itself.
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