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

Among the big winners in Elon Musk’s agreement to follow through with his deal to buy Twitter is an activist barricade fund grounded in a littoral Florida megacity that was just wrecked by Hurricane Ian.
Pentwater Capital, a 15- time-old establishment with close to$ 5 billion in means, bought a2.4 stake in Twitter during the alternate quarter. The purchase of18.1 million shares bring Pentwater roughly$ 725 million.

At$54.20, the price Musk has agreed to pay for Twitter, Pentwater’s stake would be worth about$ 980 million. The stock closed over 22 on Tuesday at$ 52, which is still below the accession price, signaling that Wall Street is n’t entirely induced the deal will close.
The Tesla and SpaceX CEO said on Tuesday that he ’d transferred Twitter a letter informing the company of his intent to stick to the terms of the April agreement after preliminarily trying to back out. The two sides were listed in court in two weeks, and part of Musk’s rearmost offer involved putting an end to the action. Twitter has said it entered the letter and intends to close the sale at$54.20, but didn’t note on the action.

When Pentwater jumped into Twitter, the social media company was in a holding pattern. The stock was sagging as Musk was putting out critical tweets about the company’s bot and spam problem, intimating at a sense of buyer’s guilt. The stock dropped as low as$32.55 on July 11, just after Musk officially tried to terminate the deal.
Pentwater was taking advantage of what the establishment saw as a clear arbitrage occasion. There was a inked contract on the table and a bunch of plutocrat to be made as long as the deal reached its logical conclusion.

“ In my 23- time career doing this, I ’ve noway seen an acquirer walk down without any reason, ” said Matthew Halbower, Pentwater’s author, in an interview on Tuesday after Musk’s form landed with the SEC. “ The probability of him being suitable to walk down was veritably low. ”
Halbower said the only two reasons that Musk would have to tear up the deal would be if there was fraud in Twitter’s fiscal statements or if there was a material event that changed the value of the company. Neither of those issues were at play, Halbower said.

Greenlight Capital also jumped in during the alternate quarter, paying an normal of$37.24 for the stock. In an investor letter, Greenlight’s David Einhorn said there’s was$ 17 per share in upside prices if the deal closed and an equal quantum in losses if it collapsed.
“ So we’re getting 50- 50 odds on commodity that should be 95 of the time, ” he wrote.

While Pentwater incontinently made Twitter one of its top effects when it bought shares in the alternate quarter, the establishment hedged its bet with a hefty investment in puts in case the stock dropped in value. So a portion of the earnings from its equity investment will pay for the puts.
Pentwater has made other bets in and around the social media space. The establishment is one of the top investors in Digital World AcquisitionCorp., the special purpose accession company that’s been trying to take former President Donald Trump’s media company public, though the deal is being delved by the SEC and the company lately missed a crucial deadline to hold onto$ 1 billion in backing. Trump’s app, Truth Social, was created after theex-president was boggled from Twitter following the events ofJan. 6.

Halbower said Pentwater has 44 workers, with just seven or so in its office in Naples, Florida. The establishment also has locales near Chicago and in New York, Minneapolis and London.
The Naples office had its power restored on Sunday, four days after Hurricane Ian slammed into the west seacoast of Florida as a order 4 storm. The office restarted on Monday, Halbower said.

Across the state, roughly,000 homes and businesses were without power as of Tuesday autumn, down from a peak of2.6 million on Thursday, according toPowerOutage.us. Collier County, which includes Naples, remains one of the counties with the most outages.
Pentwater is n’t the only investor that’s set for a big payday should the Musk deal close.

Longtime shareholder Saudi Prince Alwaleed bin Talal owns39.95 million shares, worth$2.17 billion at the accession price. Jack Dorsey, Twitter’sco-founder and former CEO, owns18.04 million shares, valued at close to$ 1 billion. Among institutions, the only investors with a bigger stake than Pentwater are Vanguard, BlackRock, SSgA and Fidelity.