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Trade Like a Hedge Fund – 1 Stock They’re All Buying

Trade Like a Hedge Fund – 1 Stock They’re All Buying

Posted On October 27, 2022 1:37 pm
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The much-talked-about acquisition saga of Twitter, Inc. (TWTR) is finally drawing to a close.

SpaceX founder Elon Musk finally agreed to buy the company for $54.20 a share. In a regulatory filing on October 4, Musk notified TWTR of his intent to go ahead with the initial agreed-upon deal to acquire the company and take it private. The stock jumped more than 22% on October 4, 2022, and has been on an uptrend since then.

TWTR Chart
Source: MarketClub

There has been no shortage of controversy as the two parties were scheduled to go to trial on October 17. TWTR had dragged the Tesla CEO to court after he informed the company of his intention to terminate the agreement in July.

Musk had backed out of the deal, stating that TWTR had failed to disclose the number of bots and spam accounts on its platform. He claimed that the company was misleading investors by misstating the number of bots on its platform by providing false numbers in its corporate filings with the SEC.

On July 12, 2022, TWTR filed a lawsuit against Musk, as his decision to back out of the deal had led to its investor sentiment tumbling. In the lawsuit, TWTR argued that having signed a binding agreement, he could not abandon it.

Just after Musk officially tried to terminate the deal in July, hedge funds Pentwater Capital and Greenlight Capital sensed an opportunity. They went long on the stock as there was a signed contract, and Musk could only pull out of the deal if there were fraud in TWTR’s financial statements or any material event that could change the company’s value. So, in the absence of these issues, Musk had no option but to honor the contract.

Greenlight Capital founder David Einhorn said, “Investing in something like Twitter, which I think will resolve this year, is good because I should get the cash out to redeploy into the next thing.”

Matthew Halbower, Pentwater Capital’s founder, said, “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,” he added.

Shares of TWTR are currently trading above their 50-day and 200-day moving averages of $44.11 and $40.74, respectively, indicating an uptrend. The stock has gained 25.8% in price over the past month and 21.3% year-to-date to close the last trading session at $52.44.

Here’s what could influence TWTR’s performance in the upcoming months:

Weak Financials

TWTR’s revenue declined 1.1% year-over-year to $1.17 billion for the second quarter that ended June 30, 2022. The company’s non-GAAP net loss came in at $57.72 million, compared to a non-GAAP net income of $174.51 million a year ago.

Also, its non-GAAP loss per share came in at $0.08, compared to a non-GAAP EPS of $0.20. In addition…

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