Elon Musk might attempt to reprice $44bn Twitter bid, says US short-seller

A US agency identified for betting in opposition to corporations’ share costs has stated Elon Musk may submit a decrease bid for Twitter, owing to a droop in tech shares and a weak monetary efficiency on the social media platform.

Hindenburg Analysis stated there was a “vital probability” that the Tesla chief govt will search to pay lower than the agreed bid value of $54.20 (£43.90) a share, which values Twitter at $44bn and has been accepted by the corporate’s board.

“We’re supportive of Musk’s efforts to take Twitter non-public and see a big probability the deal will shut at a cheaper price,” stated Hindenburg in a notice revealed on Monday.

It stated the tech-dominated Nasdaq inventory market had fallen sharply because the world’s richest particular person revealed he had taken an preliminary stake in Twitter on 4 April, implying a decrease share value for the social media plaform, whose worth has been held up by the takeover scenario. Hindenburg stated that if Musk walked away, Twitter’s shares may very well be caught up within the damaging sentiment surrounding the Nasdaq and fall by 50%.

Hindenburg added that Twitter’s current quarterly outcomes had been poor and had not been priced into the inventory, whereas Musk may pay a $1bn breakup payment to stroll away from the deal. The funding analysis agency additionally dismissed hypothesis that Twitter may implement a clause within the takeover settlement that required the multibillionaire to finish the deal.

“Musk has unimaginable leverage to renegotiate ought to he select to,” stated Hindenburg, which stated it had taken a brief place on Twitter. A brief place is the place an entity borrows shares in an organization within the expectation that the worth will fall. The entity sells these shares after which expects to purchase them again at a cheaper price earlier than returning them to the lender – pocketing the revenue.

Shares in Twitter fell 2.6% at $48.50 in afternoon buying and selling in New York.

Hindenburg stated the deal as structured would go away Twitter with a excessive quantity of debt and would make it tough for Musk to realize his objective of decreasing the corporate’s reliance on promoting. Adverts account for 90% of Twitter’s $5bn in annual income.

The deal is being part-funded by $27.25bn of money, $7.1bn of which is coming from a bunch of buyers and the remainder from Musk. An extra $6.25bn is in loans secured in opposition to Musk’s shares in Tesla, with $13bn offered in debt financing. The financial institution debt will price Twitter about $800m-$900m a yr in curiosity funds.

Hindenburg rose to prominence final yr by taking an aggressive stance in opposition to particular goal acquisition corporations, or Spacs, that are clean cheque autos that elevate cash from buyers first and search companies to purchase afterwards.