Twitter Goes Electric

By: Steve Sosnick, Chief Strategist at Interactive Brokers

By now you’ve likely heard that Elon Musk reported a 9.2% holding in Twitter (TWTR) this morning. The news came via an SEC filing at about 6:10 AM EDT and promptly caused TWTR to jump by about 20%. It is also not hurting Tesla’s (TSLA) performance. That stock opened marginally higher after reporting record deliveries that slightly missed estimates, but has now risen by about 4%.

As with most things involving Mr. Musk, there are questions that surround his TWTR activity. It is important to bear in mind that the filing states that the shares were purchased on March 14^th but only disclosed today.  We would normally expect to see a filing of this type within 10 days – remember that GameStop (GME) got moving after its chairman filed within hours of completing a recent purchase – so it does seem odd to hear about it only today. Even if we allowed for T+2 settlement, ten business days after March 14^th was March 30^th and today is April 4^th. I’ll leave that to the securities lawyers to sort out.

But it is important to keep those dates in mind when interpreting this set of tweets:

Musk was already the proud owner of over 9% of TWTR these tweets were published, only we didn’t know it yet. Perhaps someone properly interpreted those tweets on March 29th when they bought a big slug of TWTR 43 strike calls expiring April 29^th for just over $1. 

The volume was over 21,000 contracts that day, and they were bought in a hurry during the last 45 minutes of the trading day. The chart below shows the speed at which those options were purchased and how the options rose much faster than the stock. Both are signals of aggressive accumulation.

Intraday Chart, March 31^st, 2021, TWTR (blue) vs. TWTR 43 Calls Expiring April 29^th, 2021 (white)

(Click on image to enlarge)

Source: Bloomberg

That purchase is leading to a tidy profit of about 800% right now. I certainly would never accuse someone of utilizing non-public information for an options trade of this type, but I certainly hope that regulators are asking questions about such an auspiciously timed trade. 

As with many things related to Elon Musk, positive developments can bring a raft of other questions. These are among the ones that I would like to see resolved. That said, I have to credit the tweeter who snarkily stated: “Outstanding, he is securing the raw materials which drive Tesla’s share price.”