Florida hedge fund could reap around $200 million from big arbitrage bet on Twitter

Among the large winners successful Elon Musk's statement to travel done with his woody to bargain Twitter is an activistic hedge money based successful a coastal Florida metropolis that was conscionable wrecked by Hurricane Ian.

Pentwater Capital, a 15-year-old steadfast with adjacent to $5 cardinal successful assets, bought a 2.4% involvement successful Twitter during the second quarter. The acquisition of 18.1 cardinal shares outgo Pentwater astir $725 million.

At $54.20, the terms Musk has agreed to wage for Twitter, Pentwater's involvement would beryllium worthy astir $980 million. The banal closed up 22% connected Tuesday astatine $52, which is inactive beneath the acquisition price, signaling that Wall Street isn't wholly convinced the woody volition close.

The Tesla and SpaceX CEO said connected Tuesday that he'd sent Twitter a missive informing the institution of his intent to instrumentality to the presumption of the April agreement aft antecedently trying to backmost out. The 2 sides were scheduled successful tribunal successful 2 weeks, and portion of Musk's latest connection progressive putting an extremity to the litigation. Twitter has said it received the missive and intends to adjacent the transaction astatine $54.20, but did not remark connected the litigation.

When Pentwater jumped into Twitter, the societal media institution was successful a holding pattern. The banal was languishing arsenic Musk was putting retired captious tweets astir the company's bot and spam problem, hinting astatine a consciousness of buyer's remorse. The banal dropped arsenic debased arsenic $32.55 connected July 11, conscionable aft Musk officially tried to terminate the deal.

Pentwater was taking vantage of what the steadfast saw arsenic a wide arbitrage opportunity. There was a signed declaration connected the array and a clump of wealth to beryllium made arsenic agelong arsenic the woody reached its logical conclusion.

"In my 23-year vocation doing this, I've ne'er seen an acquirer locomotion distant without immoderate reason," said Matthew Halbower, Pentwater's founder, successful an interrogation connected Tuesday aft Musk's filing landed with the SEC. "The probability of him being capable to locomotion distant was precise low."

Halbower said the lone 2 reasons that Musk would person to teardrop up the woody would beryllium if determination was fraud successful Twitter's fiscal statements oregon if determination was a worldly lawsuit that changed the worth of the company. Neither of those issues were astatine play, Halbower said.

Greenlight Capital besides jumped successful during the 2nd quarter, paying an mean of $37.24 for the stock. In an capitalist letter, Greenlight's David Einhorn said there's was $17 per stock successful upside rewards if the woody closed and an adjacent magnitude successful losses if it collapsed.

"So we are getting 50-50 likelihood connected thing that should hap 95%+ of the time," helium wrote.

While Pentwater instantly made Twitter 1 of its apical holdings erstwhile it purchased shares successful the 2nd quarter, the steadfast hedged its stake with a hefty concern successful puts successful lawsuit the banal dropped successful value. So a information of the gains from its equity concern volition wage for the puts.

Pentwater has made different bets successful and astir the societal media space. The steadfast is 1 of the apical investors successful Digital World Acquisition Corp., the peculiar intent acquisition institution that's been trying to instrumentality erstwhile President Donald Trump's media institution public, though the woody is being investigated by the SEC and the institution precocious missed a cardinal deadline to clasp onto $1 cardinal successful funding. Trump's app, Truth Social, was created aft the ex-president was booted from Twitter pursuing the events of Jan. 6.

Halbower said Pentwater has 44 employees, with conscionable 7 oregon truthful successful its bureau successful Naples, Florida. The steadfast besides has locations adjacent Chicago and successful New York, Minneapolis and London.

The Naples bureau had its powerfulness restored connected Sunday, 4 days aft Hurricane Ian slammed into the westbound seashore of Florida arsenic a Category 4 storm. The bureau reopened connected Monday, Halbower said.

Across the state, astir 380,000 homes and businesses were without powerfulness arsenic of Tuesday afternoon, down from a highest of 2.6 cardinal connected Thursday, according to PowerOutage.us. Collier County, which includes Naples, remains 1 of the counties with the astir outages.

Pentwater isn't the lone capitalist that's acceptable for a large payday should the Musk woody close.

Longtime shareholder Saudi Prince Alwaleed bin Talal owns 39.95 cardinal shares, worthy $2.17 cardinal astatine the acquisition price. Jack Dorsey, Twitter's co-founder and erstwhile CEO, owns 18.04 cardinal shares, valued astatine adjacent to $1 billion. Among institutions, the lone investors with a bigger involvement than Pentwater are Vanguard, BlackRock, SSgA and Fidelity.

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