Jim Chanos Explains Why
While most celebrity asset managers are known for the stocks they love, there are a few whose names are linked with companies they despise. Chief among those investors is Jim Chanos, the famed short-seller who helped exposed the Enron scandal.
Through his firm, Kynikos Associates, Chanos has taken enormous short positions on both of Elon Musk’s publicly traded firms: Tesla Motors Inc (NASDAQ:TSLA) and SolarCity Corp (NASDAQ: SCTY)
Advertisement
He has been extremely vocal in his criticisms, calling them a “melange of publicly-traded and privately-traded science projects sort of gone awry.” (Source: “Why Jim Chanos is thoroughly unimpressed by Tesla,” Yahoo! Finance, October 20, 2016.)
Jim Chanos also called Elon Musk a “messianic” leader, insinuating that Musk commands a cult-like following of sycophants. Chanos believes the blind worship of Elon Musk’s backers leads to horrendous business mistakes, ones that he seeks to exploit through short-selling practices.
“The fact of the matter is this is a company — in Tesla’s case — that’s now really going to need to step up the production,” Chanos said at the Vanity Fair New Establishment Summit in San Francisco on Wednesday. “It’s going to be competing against Mercedes, Audi, VW, finally, who are bringing product lines as an OEM [original equipment manufacturer].”
His point is simple: Tesla has an uphill battle to increase its production numbers, whereas existing automakers are able to make that transition with greater ease, and probably at lower cost. Tesla’s head start is quickly evaporating as the big names pour more energy and resources into electric and self-driving technologies.
Chanos also thinks Tesla’s “Gigafactory” is a false positive for the company. The mega-sized battery production plant is supposed to help Tesla produce at economies-of-scale, but Chanos thinks the savings will be limited.
“This is not a high-technology company in that people forget that battery technology has been around a long time,” he continued. “It’s not subject to Moore’s Law. It’s basic chemical reactions.”
But Jim Chanos didn’t limit his remarks to Musk’s car company. He also took aim at the billionaire inventor’s solar power firm, saying it is “basically a roofing company with a consumer financing arm attached to it.”
