Elon Musk Twitter acquisition gets $8.5M from small CT hedge fund with limited online presence

Photo of Paul Schott

STAMFORD — The world’s richest person’s plan to buy one of the biggest social media platforms is a story trending around the globe — and a small Connecticut hedge fund is jumping onboard.

Among the approximately 20 investors supporting Elon Musk’s $44 billion takeover of Twitter is an investment-management firm based in Stamford: Cartenna Capital. The hedge fund manager has committed $8.5 million as an equity investor, according to Securities and Exchange Commission documents filed this month.

While Cartenna is small and relatively unknown compared with the hedge fund giants based in Connecticut, its involvement in the acquisition highlights its home state’s standing as a financial services hub where many firms are involved in landmark deals.

“We believe this investment represents an opportunity to support an incredible business leader at an important time for Twitter,” Peter Avellone, managing partner and chief investment officer of Cartenna, said in a statement. The firm declined to comment further on the investment.

Cartenna is based in downtown Stamford at 281 Tresser Blvd. It has $359 million in assets under management, according to financial services data provider Preqin.

The firm was founded in December 2019 by Avellone, “a former portfolio manager at various multi-strategy firms, including Millennium Management, Citadel and Point72 Asset Management,” according to a Preqin online profile of Cartenna. Stamford-based Point72, founded and led by Steven Cohen, is one of the largest Connecticut-based hedge fund managers, with about $24 billion in assets under management.

For investors like Cartenna, “in addition to being profitable by itself,” supporting Musk’s acquisition of Twitter, “may also be a foot in the door for future projects of this creative man,” Lawrence J. White, a professor of economics at New York University, said in an interview with Hearst Connecticut Media Group.

Musk, who is also the chief executive officer of electric-vehicle maker Tesla, ranks as the wealthiest person in the world by several measures. As of Tuesday, he had a net worth of $232 billion, according to the Bloomberg Billionaires Index. But experts such as White said even for Musk unilaterally funding the acquisition would have been burdensome.

“My understanding is that almost all of his wealth is tied up in Tesla stock,” White said. “He’s already sold some Tesla stock, but he doesn’t want to have to liquidate a big fraction of his holdings to acquire Twitter. So he needs help.”

Factoring in the new financing, the $12.5 billion margin loan that Musk received to buy Twitter has decreased to $6.25 billion, according to the SEC filings. About $27 billion in equity and cash is now financing the acquisition.

The largest investor in the deal is Prince Alwaleed bin Talal of Saudi Arabia, who has committed to rolling his $1.9 billion stake in the company into a privatized Twitter. The prince had initially opposed Musk’s offer because he said it undervalued Twitter.

Among the other 17 investors disclosed in the SEC filings, Larry Ellison, co-founder of cloud-technology giant Oracle, is contributing $1 billion. Venture capital firms Sequoia Capital and Andreessen Horowitz, respectively, pledged $800 million and $400 million. Dubai-based investment firm VyCapital is contributing $700 million, while cryptocurrency exchange Binance.com is putting in $500 million.

A new era at Twitter

Musk would put an indelible imprint on Twitter, assuming he completes the acquisition. His ownership of the platform would affect a daily active user base that totaled about 229 million in the first quarter of 2022, up 16 percent from a year ago.

San Francisco-headquartered Twitter would become a private company as a result of Musk’s purchase, and he has signaled that he intends to make other sweeping changes. Speaking virtually at an auto conference on Tuesday, Musk said he would reverse Twitter’s ban on former President Donald Trump, the Associated Press reported. He said the ban following the Jan. 6, 2021 insurrection at the U.S. Capitol was a “morally bad decision” and “foolish in the extreme.”

“I think that was a mistake because it alienated a large part of the country and did not ultimately result in Donald Trump not having a voice,” said Musk, adding that he preferred temporary suspensions and other narrowly tailored punishments for content that is illegal or otherwise “destructive to the world.”

Cartenna officials appear to have been scrutinizing Twitter for some time. Before the April 25 announcement of the company’s agreement to be sold to Musk, Avellone spoke about social media sites, including Twitter, in a video posted April 13 on the Twitter account of Prometheus, a platform that connects investors and alternative fund managers.

“There’s a lot of noise, and, you know, at the end of the day, people who are risking their own money, they’re going to do the level of work that gives them comfort,” Avellone said in the video, which appears to have been shot in the firm’s office building on Tresser Boulevard. “I would just encourage people to not just trust what’s out on Twitter, what’s out on Reddit or other message boards, but to also pick up a company’s actual filing once a quarter, read that 10-Q, that 10-K, and actually make sure that what you’re following on social media is actually what the company is telling you in their own financials or their own forecast for the future, so ... you can make that most-informed and best decision for yourself.”

Despite their new investment, Cartenna officials are keeping a low profile on Twitter. Twitter search results on Wednesday did not show any accounts for Cartenna as a firm or Avellone in a personal capacity.

Cartenna’s website does not offer additional information about the firm either. As of Wednesday evening, it consisted of a homepage showing the firm’s name and email, but no other content or links.

In contrast, the businessman with whom they are partnering has a rather substantial online presence. As of Wednesday, Musk’s Twitter follower count totaled about 92 million. Since joining the network in 2009, he has sent out about 17,700 tweets.

pschott@stamfordadvocate.com; twitter: @paulschott