Stockfoo
The following segment was excerpted from this fund letter.
Twitter (TWTR)
We added materially to our Twitter position during Q3, as we became more confident in the company’s legal case against Elon Musk. We updated subscribers on our thoughts in early September with a long blog post.
Positive data piled up throughout the third quarter. For example:
- The Chancellor’s rulings. The presiding judge went out of her way on several occasions to show disdain for Musk’s arguments in her pre-trial rulings. Her remark during one hearing that “damages would not suffice” as a remedy spoke volumes, as it implied that she would force Musk to buy the company if he lost at trial.
- An utter lack of supporting evidence for Musk’s core bot misrepresentation claim. In fact, during discovery it was revealed that Musk’s own experts estimated that roughly 5% of monetizable daily active users were bots – the same number used by Twitter – directly contradicting the claims Musk made in his countersuit.
- Signs of evidence destruction by Musk. During discovery it was revealed that Musk used disappearing messages on the messaging app Signal to discuss the Twitter deal, contradicting his earlier statements.
We followed these developments closely, and our increasing confidence eventually led us to take Twitter to a 20% position at cost. This was the largest bet we have ever made.
Meanwhile, time counted down until Musk’s deposition when he’d finally be forced to answer numerous difficult questions about the Twitter deal. In his career, Musk has gotten away with making many claims that, interpreted charitably, were hopelessly optimistic – and interpreted uncharitably, were self-serving lies.
But a deposition is not the place for such behavior. Likely looking to avoid answering questions for which he’d have no good answer, first Musk delayed, feigning COVID-related concerns to put off the first deposition date. Then, the day before the rescheduled deposition, he sent a letter to the Twitter board. In this letter, he implicitly capitulated on all of his purported reasons to terminate the deal, telling the company that he was prepared to close in a very short period of time. He then pitched this timeline to Chancellor McCormick, who agreed to stay the trial until October 28th.
As most people know by now, the deal closed on original terms late on October 27th, and Musk is now “Chief Twit.” Our clients enjoyed a nearly 50% return from our average purchase price of ~$37 in less than six months.
We look forward to reinvesting Elon’s money into our other portfolio holdings.
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The performance in the charts is the performance of the securities in all Bireme accounts (“Bireme Master Account”) and the strategies that make up the account holdings from inception through 9/30/2022. The performance in the tables is the performance from inception and from 7/1/2022 through 9/30/2022. Past performance is not indicative of future results. It is not possible to invest directly in an index. Index performance does not reflect charges and expenses and is not based on actual advisory client assets. Index performance does include the reinvestment of dividends and other distributions. The performance in the Bireme Master Account is shown as net of 1.75% advisory fees. Some clients may receive services at a lower advisory fee with a performance fee based on the gains in the account. Returns are shown net of fees at the account level, and gross of fees at the individual strategy level. For current performance information, please contact us at (813) 603-2615. Sources: Bloomberg Finance LP, Interactive Brokers LLC, S&P Compustat, Bireme Capital LLC. |
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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