High-profile short-seller Jim Chanos of Kynikos Associates has stepped up his bets against electric car maker Tesla throughout the year even as the company’s shares rallied.
Chanos, who first said he was betting against Tesla shares in May last year, said that he expected its chief executive Elon Musk to step down from his position by 2020 to focus on his private rocketship company SpaceX as competitors such as BMW and Porsche expand their lines of luxury electric vehicles.
“Obviously this is not being valued as a car company, it’s being valued on Musk … he’s the reason people own the stock,” Chanos said at the Reuters Global Investment 2018 Outlook Summit on Tuesday.
Chanos is famous for having correctly bet against Enron Corp long before the US energy giant’s 2001 bankruptcy.
Shares of Tesla are up 44 per cent for the year to date, at one point pushing its market value higher than competitor General Motors despite Musk’s company not turning a profit.
On November 1, Tesla reported its largest-ever quarterly loss and pushed back its production target of its new Model 3 sedan by three months. The company said it now expects to build 5,000 Model 3s per week by late in the first quarter of 2018, having orginally planned to get there in December.
Despite the production delays, the company has been among the most painful for short-sellers this year, with losses among funds that bet on its decline totaling more than $US4 billion this year, according to S3 Partners, a financial analytics firm. Short sellers borrow stocks that they expect to decline, aiming to return them later at a lower cost to pocket the difference.
“Put it this way,” Chanos said. “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.”
He said the company is burning more than $US1 billion in cash each quarter and will have a harder time tapping the capital markets if and when Musk leaves. Tesla will go bankrupt, he said, without giving a timeframe.
Tesla didn’t respond to a request for comment.