Chanos had previously disclosed his bet against the shares of both companies in the spring.
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Tesla’s proposed acquisition of SolarCity is “the height of folly”, he said earlier in the day at the Delivering Alpha conference sponsored by CNBC and Institutional Investor. He added that Musk’s plan to buyout SolarCity is a “shameful example of corporate governance at its worst”. Chanos also said the Model 3 will never be a $35,000 vehicle.
New information that Tesla disclosed recently helped him understand “just how insane this merger is and the damage it’s going to do to shareholders”, Chanos said.
SolarCity shares were down about 5.4 percent in late trading and shares in Tesla were down about 2 percent.
The short-seller believes that the combined entity could have capital spending of about $1 billion per quarter and persistent need to tap capital markets. “And when you need that amount of money just to run your business model, you put yourself at risk”.
Tesla has a lot going on right now with increased competition, huge cash burn, the pending SolarCity deal, the gigafactory that is still not completed and the recent rocket explosion at Elon Musk’s space company SpaceX, Chanos noted. Chanos’ point: If SolarCity can’t even get financing from its sister-and-soon-to-be-parent company, who else would loan it any money?
Tesla and SolarCity chief Elon Musk’s vision relies heavily on borrowing from the capital markets, Chanos said, noting that this contrasts with the approach of Amazon.com Inc founder Jeff Bezos. “This is anything but”, Chanos said of Tesla.
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Looks like hedge fund manager Jim Chanos is no fan of Elon Musk, the CEO of American electric vehicle brand Tesla Motors Inc (NASDAQ:TSLA). Chanos explains, “What made Amazon great… is that they didn’t need capital”, even when the online streaming leader had obstacles in persisting to be a profitable company.
