Hindenburg Research's Perfect Prediction On Elon Musk's Twitter Deal

in LeoFinance3 months ago

hindenburgtwitter.png

Two months ago I wrote about how Hindenburg Research took a short position on Twitter stocks and how they predicted Elon Musk would most likely walk away from the deal if he can't renegotiate the deal for a lower price tag. As usual, Hindenburg Research made their research and reasons for shorting Twitter public and the logic behind their action did make sense. However, Hindenburg Research very rarely shorts well known stocks/companies. Normally, their investigations and research involve less known stocks and companies that are involved in scams, fraud, and/or deceptive financial tactics. It was a big bet to short Twitter in the midst of it being the main topic talked everywhere due to the Elon Musks offer to purchase it.

Their publication and short position came only a couple weeks after Elon Musk made his Twitter bid public. That was very fast and accurate research and analysis of predicting the future on this Twitter deal.

Feel free to read the full report here. These are the outlines of their research and reasons why they were taking a short position on Twitter:

  1. Nasdaq Has Plummeted ~17.6%, Implying A Twitter Price of ~$31.40 Per Share Without a Deal
  2. Twitter Reported Weak Quarterly Results And Disclosed It Had Overstated Its Users (Again) Just 3 Days After Accepting Musk’s Offer, Suggesting Further Downside That Has Not Already Been Priced In, Should Musk Walk Away
  3. Musk Indicated He Will Sell His 9.2% Twitter Stake Should a Deal Not Consummate
  4. Hindenburg Research Believes The $1 Billion Breakup Fee Really An Option To Walk Away
  5. The Public Square Should Rest on a Foundation of Financial Stability, Not Risky Leverage
  6. The Board Has Virtually No Stake in Twitter. Key Holders Rolling Existing Equity or Contributing New Equity Would All Benefit From a Revised Deal
  7. The Overpriced Twitter Deal Is Placing Undue Pressure on Tesla, Due to Equity Sales and The Prospect of More Margin Debt
  8. The Risk/Reward Of Shorting Twitter

When Hindenburg Research announced their analysis and short position, there was no hint of a possibility that Elon could walk away from the deal. It seemed like it was done deal, wherever Elon went everybody kept asking him what his plans were for Twitter. And he did share some of them without suggesting that he may walk back on the deal. However, after this research, analysis and predictions were published by Hindenburg research we started seeing the indications of how they might actually be right.

We saw this in Elon's sudden interest of Twitter's bots to humans activity ratio. Out of nowhere Elon Musk, who claimed many times how much he loves Twitter, started demanding from Twitter to show data on Twitter's bot activity. It is a known fact there are bots on Twitter and all other social platforms. Bots are part of normal digital life. They didn't bother Elon before. But now for some reason he started considering them a big deal and potentially a deal breaker on his Twitter purchase. Simple question that comes to mind is, shouldn't Elon's and his team have made inquiries about this issue before making the offer?

I have no doubt Elon's legal and tech teams have made their thorough research into Twitter and assessed pros and cons of such purchase. Elon Musk has always been interested in Twitter, and not only to express his thoughts, share memes, and pump Doge coin. He did have financial interest as well, and this can be seen in his methodical purchase of Twitter stocks and becoming the largest stakeholder before he even made his interest to just buy Twitter and make it a private company again.

For these reasons, I do not buy the argument that he didn't know the real or even close to real approximate numbers of bot activity on Twitter. Just like Hindenburg Research have outlined in their reasons, I believe Elon has realized that he was paying too much for Twitter, especially after all markets started dropping significantly. Nobody knew that markets would make this turn that fast. Neither did Elon. But it happened, and all of the sudden he may have realized he is overpaying for Twitter and walking away from the deal, even if it may cost him a billion dollars, still could save billions more.

The most recent news today is that Elon Must actually officially has terminated the $44 billon Twitter deal. What a perfect prediction by Hindenburg Research. Impressive! While this may cause Twitter stock price to go down a little bit more. Especially if Elon decides to sell his shares. However, I don't think in a long run it will affect Twitter much. It has been a bear market. Many stocks have been down, and maybe will continue to drop more. Who knows. But I have no doubt when overall market sentiment and trends change, Twitter stock prices will do just fine as well. Love it or hate it, Twitter has become a global public forum. It has become more than just a tech company. As much as I like to see decentralized alternatives to emerge, Twitter is not going anywhere anytime soon. I do believe though that the future is bright for decentralized networks and hopefully Twitter killers will be built on Hive.

I don't blame Elon for walking away from his commitment to buy Twitter to save money. Nobody would want to overpay, especially if they think they can't get their money back in a timely manner. Anybody in his shoes would have done the same thing if there wasn't an option not to overpay. I think this deal just happed at a wrong time. If market conditions didn't change, the deal could have gone through. This is still not the end of it. This could still be a negotiating tactic to get a better deal for Elon.

Just like the purchase deal itself wasn't final, it seems the breaking the deal won't be final either. Twitter is already threatening to sue. And there is that billion dollar question, will Elon end up paying the billion dollar penalty? Judging from his tactic of making it look like Twitter misrepresented data about bot activity on the platform, he may try to get away from not paying the billion dollar. At the very least if Twitter insisted on him to pay, his lawyers may just drag the dispute in the courts for a long time until everybody has forgotten about this whole drama. Both Twitter and Elon aren't going anywhere and this love/hate affair will probably continue for a while and keep everybody entertained.

On a finale note, I think buying Twitter entirely and making it a private company for $44 billion dollars wasn't a smart idea. This amount of money could be spend way more meaningful and impactful things and causes. It is inevitable for the web and all networks on web to shift towards more decentralized solutions. Not sure it is a good time to throw billions into centralized platforms. Even the founder of Twitter, Jack Dorsey himself has been saying for years now the future is in decentralized standards. That's why he created Bluesky project in the first place.

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Elon is an interesting guy and he doesn't fit into any stereotypical boxes or labels so people don't know what to make of him.

I thought watching the twitter woke crowd freak out was going to be fun, but it's still an interesting deal or lack of deal and it will be interesting to see what happens next in this financial game of chess.

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I had thought he wanted to buy it to make it decentralized, but that would probably cost more, why not just start new one or join an existing one. Hive.

Well thought move tho.

The bots issue was just a hanger for the backing out I guess..

$44 billion is way too much to attempt to decentralize twitter, a better option could be funded with way less, and considering his status, I don't expect it to be that difficult to earn users.

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Yeah. With over 100 million followers.. That's like 10 platforms put together..

No, he wanted make it a private company.

Ohoo.. you have it right.. now I see, he would have been in loss. It's all business..

We already have a better Twitter alternative with @dbuzz which you must try out if you have any interest in decentralized microblogging. The features available are far greater than what Twitter provide (except for a clear lack of polls). @leofinance is working on their alternative to Twitter although there are no clear release dates AFAIK.
!PIZZA

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Yes I love the dbuzz idea. I do share some reservation about it.

My post feeds, some autovotes and the quality of the post. A short post may be taken for a shit post by some people.

In order to avoid this I had to hold on with engaging with the app.

You can create an alt account like @dalz.shorts made for short from content. There are many users who are already doing this.
!PIZZA

Interesting..
Just looked up the account.

So are we gonna be able to do something like ... Vote for A, reblog for B

😅😅

Give it a try if you think of it as a better way to manage your activity. This way you can have your random thoughts and short form content and sharing handled without having to worry about overall quality of your blogs because the two types of content will be separated.
!PIZZA

Thanks so much. I will give it a process. Thanks.

Oh woww

Well, I know Elon to be a crazy being right from his early days in the Bitcoin family. One minute, he was all praises BTC and the next he turns into a protagonist in the movie.

He has a way of buying into sectors, creating hype and backing down. I'm still surprised he hasn't done same with doge, yet.

That's what happens when you have so much money you wish to spend, I guess.

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I don't blame Elon for walking away but I would hope he says more about why he walked away. I don't think it's only the spam bots.

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Yeah. We should have shorted Twitter. What a mess.

I think that everybody would away from this kind of deal now. I am very itnerested if he gets out of it so easy now. Also I am very curious how the stock price will unfold. I can imagine it plumeting even more, now that the investors are not getting their promised share price. It would be a master move to then bring out a new offer by Elon :D

I think stock price would depend on if he sells or how fast he sells his shares.

Would have liked a more open leadership under Musk. Oh well..

@tipu curate

Interesting market response. When Musk announced his intention to buy Twitter, I thought the market price of the social media company would shoot up. It never happened. Now that the deal is off, its market price is crashing.

As for Hindenburg Research shorting Twitter, that's a very impressive move. Such an unpopular decision a few months ago is now proven sound and insightful.

!PIZZA

!CTP

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Yup yup! No matter what his reasons or if it was a good choice.. it's twitter.. not saying they are bad or not important, but there are many other more MEANINGFUL, help the world stuff that money could be used for..

Great. Thank you so much for bringing the information

To have edge in everything, someone needs to be smart.

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