Elon Musk’s decision to relaunch its takeover of Twitter for 44 billion dollars Inc. is great news for investors, including billionaire Carl Icahn, who has continued to bet on the outcome of the deal through months of uncertainty.
After Musk and Twitter agreed to to proceed with the deal at the initial offer price of $54.20 per share on Tuesday, shares of the social media company rose 23%, pushing the gap to its narrowest level since the pair closed a merger pact in April. Shares of the company slid 0.4% in premarket trading on Wednesday.
Tuesday was a “great day for arbs,” said Julian Klymochko, managing director of Accelerate Financial Technologies. Closing the saga in favor of Twitter demonstrates the strength of definitive merger agreements and contract law, said Klymochko, who runs a merger arbitration investment fund.
Arbitrage traders make money by betting on merger deals, with the potential for millions of dollars in profits if the deals go through. Now it remains only to wait for the conclusion of the agreement.
Icahn capitalized on the dispute, according to people familiar with the matter. He acquired a stake of about $500 million in the mid-$30 per share range, the people said, asking not to be identified because the matter is private.
The seasoned investor bought the stake thinking Musk wouldn’t be able to get out of the deal, and assuming the stock value was in the range of around $30 per share, which made the downside risk if Musk won the minimal trial, they added.
As a result, Icahn earned approximately $250 million after the run in the shares of the company. A representative for Icahn declined to comment. His participation was reported earlier by the Wall Street Journal.
The contentious deal has sent Twitter shares on a rollercoaster ride in recent months. It soared to $54.57 in April as the deal seemed close to closing, and as low as $32.52 in July after Musk sent a termination letter in a bid to walk away. of the takeover proposal. The stock rebounded again last month as a judge heard Twitter’s lawsuit arguments aimed at forcing Musk to close the deal.
“For arb traders, this is a good result overall,” said Aaron Glick, merger arbitrage specialist at cowen & Co., which makes markets and is long on Twitter common stocks and stock options.
Sign up for the Makeshift Features mailing list so you don’t miss our biggest features, exclusive interviews and surveys.