These 3 Famous Hedge Fund Managers Just Cleaned Up on Elon Musk’s Twitter Buyout Turnabout
Faced with a legal battle that he would have almost certainly lost, Elon Musk finally relented and agreed to move forward with his previously agreed-upon deal to acquire Twitter at $54.20 per share.
Anticipating that Musk would ultimately have no choice but to move forward with the Twitter (NYSE: TWTR) buyout, well-known hedge fund managers Carl Icahn, David Einhorn, and Dan Loeb made substantial bets that the deal would end up going through. With the TWTR deal back on track, these investors are now counting their massive profits.
Carl Icahn, Dan Loeb, David Einhorn and Florida hedge fund Pentwater Capital acquired significant stakes in Twitter, benefiting from the rise in the share value. After harping about the number of fake accounts he believed to be on the platform, Musk declared that he was backing out of the deal, setting the stage for the legal showdown that is now coming to a close.
After news came to light that Musk had filed documents with the SEC indicating that he would move forward with the buyout, Twitter’s price shot up nearly 24%. However, the price has not yet reached the acquisition price, indicating there is still some doubt on the market that the deal will move forward. This presents an arbitrage opportunity for those who believe the takeover is moving forward.
While retail investors reaped great rewards from their Twitter bets, some of the biggest winners from Musk’s reversing course have been several well-known fund managers, activist investors and short sellers.
Carl Icahn, who typically invests with the goal of gaining a board seat, invested over $500 million in Twitter over the last few months. Like Musk, he never actually joined the board, but he’s estimated to profit over $250 million once the deal closes.
Also Read: Elon Musk Flip-Flops on Twitter Deal, Agrees to Move Forward With TWTR Buyout?
A Florida-based hedge fund, Pentwater Capital, is also reported to have pocketed hundreds of millions of dollars after buying up shares after the price fell once Musk indicated that he would pull out of the deal. Pentwater’s $750 million bet gave them a 2.4% stake in the company and should grow to $980 million upon Musk completing the acquisition.
Pentwater founder Matthew Halbower explained that Musk’s trying to pull out of the deal created an arbitrage opportunity they couldn’t resist. Halbower elaborated further, stating:
“In my 23-year career doing this, I’ve never seen an acquirer walk away without any reason. The probability of him being able to walk away was very low.”
Even well-known shorts Daniel Loeb and David Einhorn were able to get in on the opportunity. While they’re most well known for betting against companies, the arbitrage opportunity was too much to pass up. Both should see gains of over 40% when the deal closes.
While the saga is not yet over, we are near the end. Although most of the gains have been made, the price is still $5 off the purchase price, presenting an opportunity for modest gains in the coming months. The deal is almost guaranteed to go through now, so the risk is very low.
Shares of Twitter are currently changing hands at $49.94 per share, down 0.26% on the day. YTD, TWTR stock is up 17.14%.
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