“We believe that if Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50 per cent from current levels. Consequently, we see a significant risk that the deal gets repriced lower.”
Twitter released its March-quarter results three days after the board accepted Mr Musk’s offer, and at the time, also revealed that it had overstated the number of users in the December quarter, a factor that would likely weigh on the company’s market value.
The March-quarter result revealed weaker than expected revenue growth. Hindenburg said the presence of bot and spam accounts may flatter the statistics that track activity across the platform.
Twitter shares are up 11 per cent this year while the Nasdaq Composite index has shed a quarter of its value. The social media company’s shares shot 27 per cent higher on the day Mr Musk unveiled his stake, but have since ebbed 4 per cent lower to a closing price on Monday of $US47.96.
That price is below the $US54.20 implied in the Tesla founder’s deal, indicating investor unease.
Hindenburg’s successful short bets in the past have included Nikola, the electric vehicle maker, which has fallen sharply in value over the past 18 months after initially soaring through the early stages of the pandemic.
The company faced claims of inflating its performance and capabilities, according to Hindenburg’s report released in October 2020, shortly after a deal was struck with General Motors and Nikola. The shares have fallen by four-fifths since Hindenburg released its research.