Jim Chanos is betting against Elon Musk ― here's why (TSLA, SCTY)
Reuters
Billionaire hedge fund manager Jim Chanos is betting against Elon Musk.
Chanos said Wednesday he is short Tesla, the car company led by Musk, and SolarCity, where Musk is chairman.
He was asked by CNBC whether he was short Tesla after Bloomberg reported that two executives responsible for building its cars, Greg Reichow and Josh Ensign, will leave the electric car maker.
Here's Chanos on the issue:
One of our historical sign posts, of a company in trouble is when numbers of senior people leave over a short period of time. Tesla fits that bill. We have a chart that we've had — I guess we're going to have to update it this afternoon — of senior executives leaving Tesla. It is a flood of people leaving in the past few years. And that is not a good sign and this is a company that can't forecast its deliveries one quarter out. And yet everybody is confident about what they're going to make in 2020 or 2025. I want to see them make the model 3 and sell it profitably. I don't think they can do it.
Tesla reported first quarter numbers after the market closed on Wednesday. The company earned $1.6 billion in revenues and a narrower-than-expected adjusted loss per share of $0.57. Tesla was expected to report a quarterly adjusted loss of $0.60 per share, and revenues of $1.61 billion according to Bloomberg.
Elon Musk said in a letter to investors that the company had decided to bring a plan to build 500,000 total units across the Model S, Model X and Model 3 forward two years to 2018.
Chanos responded to the Tesla earnings and Musk's letter later on Wednesday when speaking at the Sohn conference. He said:
He has not enough production capability, he has not enough batteries, and now he has not enough executives, so what does she do? He pulls production two years forward. That’s a showman. I love it.
Chanos is also betting against SolarCity, the renewables company where Musk is chairman. He has been shorting the stock since last August. The stock has fallen about 59% since then.
Here's what he told CNBC:
In the last quarter, Solar City had lease revenues of 75 million dollars. If we assume no expenses, one person at headquarters to basically take the lease payments to the bank, no depreciation, no interest, whatever, they have 6 billion of capital employed in the business. 300 million divided by 6 billion is a 5 percent return on the solar leases. We think that John Hancock was using something like an 8 percent discount rate. So the problem with Solar City is they're losing money on every installation and making it up on volume. And that's a problem when you have a levered balance sheet. I think Solar City gets into financial trouble in 2016.
He also said he is still short Valeant, and that he is betting against Chinese e-commerce giant Alibaba.