• Hindenburg Research announced it had built a "significant long position" in Twitter stocks Wednesday.
  • The research firm's founder said that Twitter will rally after the collapse of Elon Musk's takeover deal.
  • Twitter surged 8% after Hindenburg's announcement.

Hindenburg Research has built up a significant stake in Twitter as a legal battle brews between the social media company and Elon Musk.

The research firm said that it is bullish on Twitter after the seeming collapse of Musk's $44 billion takeover bid.

"We have accumulated a significant long position in shares of Twitter," Hindenburg tweeted Wednesday. "Twitter's complaint poses a credible threat to Musk's empire."

Musk is attempting to terminate the merger agreement he signed with Twitter in April, which said he would take the company private at a price of $54.20 a share. Twitter intends to sue him for backing out of the deal.

Twitter shares initially rallied 8% on Wednesday, before slipping 0.2% at the opening bell Thursday.

Hindenburg is renowned for its activist short-selling approach, having published high-profile reports criticizing companies including Nikola, Kandi Technologies, and Lordstown Motors. It's much rarer for the investment firm to make a long position public.

"Musk has squandered much of his leverage, largely through misadvised and compulsive tweets," Hindenburg founder Nate Anderson told the Financial Times this week. "Twitter has a strong case."

Read more: Famed short-seller Carson Block breaks down why Didi's NYSE delisting is the harbinger of many other Chinese companies pulling out of US exchanges — and shares where he is finding opportunities in 'this era of massive misallocation of capital'

Read the original article on Business Insider