Chanos Shorting Tesla as Musk Attempts to Buy SolarCity

September 14, 2016 James Heinsman Hedge Fund News

Elon Musk at the 2015 Tesla Motors Annual Meeting. Photo by Steve Jurvetson

Elon Musk at the 2015 Tesla Motors Annual Meeting. Photo by Steve Jurvetson

The hedge fund manager who became famous for predicting the fall of Enron and then cashing in on his prediction, Jim Chanos, is now forseeing that Elon Musk’s Tesla is poised for a similar fall.

Chanos explained his position at the CNBC Institutional Investor Delivering Alpha conference held on Tuesday. Placing his short bet on Tesla, the Kynikos Associates hedge fund manager, reiterated his opinion expressed in June that Musk’s plan to acquire SolarCity is a “shameful example of corporate governance at its worst.”

Only now Chanos is even more convinced of Tesla’s inescapable fall since Musk released new information about his planned purchase. That information helped him realize “just how crazy this merger is and the damage it’s going to do to shareholders.”

Chanos’ basic argument is that both Tesla and SolarCity are in desperate need of capital. Both companies are dealing with a serious cash shortage, and both have announced that they are looking to raise additional funds this coming year. Together the companies are spending about $1 billion every quarter, and will therefore need constant access to capital markets.

“And when you need that amount of money just to run your business model, you put yourself at risk,” Chanos proclaimed.

Elon Musk, Enron, Jim Chanos, Kynikos Associates, SolarCity,

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