Hedge Fund Manager Convinced Tesla Shares Will Collapse

Matt Posky
by Matt Posky
hedge fund manager convinced tesla shares will collapse

American investment manager and short-seller extraordinaire Jim Chanos claims Tesla is “headed for a brick wall.” Having deemed the automaker as structurally unprofitable, Chanos said, “Three years ago, this company was supposed to be making money [today]. And now, it’s supposed to be making money by 2020. I’m guessing by 2019, we’ll hear about 2025.”

However, while Tesla has taken on massive amounts of debt to ensure its evolution as company, investors haven’t seemed to mind. Its stock price has climbed from $33 a share in 2013 to almost $380 in September of 2017. As a short-seller, Chanos says he’s lost money on the company in the past since the stock price never seems to go down, and that’s what he finds the most alarming.

“Nobody is buying Tesla stock based upon the current business,” he said. “It’s all based on the future and the hope for half-a-million to a million Model 3s per year.”

“But let me make an important point, one of the reasons this company was successful and that Musk had a vision ahead of everyone else is that he made electric vehicles sexy,” Chanos told Bloomberg. “The Model S was a sexy car.”

Unfortunately, Chanos also noticed that established automakers have seen Tesla’s hand and are now working to deliver some legitimate competition. He believes this will be the company’s downfall, noting that it has lost the lead in autonomous driving development to manufacturers like General Motors and Audi.

Chanos is probably most famous for successfully predicting the financial implosion of Enron in 2001 — and he claims to have noticed things reminiscent of that corporate disaster in Tesla. However, while the automaker has lost a vice president of business development, two software chiefs for Autopilot, and the director of its battery technology in the last 12 months, there are reasons to doubt Chanos’ Humpty Dumpty scenario.

Overvalued as its stock price may be, Tesla has begun to diversity itself — taking on mainstream, lower-priced vehicles with the Model 3 while also developing an electric semi truck. It would need to truly muck up both of these products to cripple Wall Street’s current confidence in the brand. Fortunately for Chanos, Tesla’s launch of the Model 3 hasn’t been without problems. But that could change with suppliers now reporting that they are operating under Tesla’s guidance of 5,000 units per week.

That said, the stock market is a fickle mistress operating under the influence of imagery bullshit and faith-based investing. This is where Chanos’ final prediction, where Musk departs Tesla to focus on one of his other companies in the coming years, comes into play. Without Elon, the company may lose that je ne sais quoi that makes it irresistible to investors. But the CEO has issued no hints that he’ll leave the company anytime soon, so any claim that he might take a hike is purely speculative — sort of like the stock market itself.

[Image: Tesla Motors]

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  • Alfisti Alfisti on Dec 15, 2017

    I still think all EV is a tough, tough sell. I wonder if it is cost effective to go all hybrid instead, basically include a really basic little 1.0L ICE "just in case"? The whole range and charging thing still doesn't work for most people.

    • Vvk Vvk on Dec 15, 2017

      > The whole range and charging thing still doesn’t work for most people. Only because most people do not understand the way it works. Vast majority of people would change their opinion if they only tried.

  • Stuki Stuki on Dec 15, 2017

    And in related news, a guy who won the lottery in 1998, says he can recognize the signs of another winning ticket coming up, recommending everyone run out and buy lottery tickets....... If Elon and Cp. plays a bit fast and lose with reality from time to time; the self promoting undifferentiated clown brigade that makes up the higher echelons of the Fed's roster of favorite welfare recipients; are so far beyond hopeless as to make broken watches seem positively Einsteinian.

  • Tassos The EQS is the best looking BEV, better than even the only Tesla I would ever consider (the S) and more luxurious inside etc etcThe self driving features will come in handy when I'm 110 and my eyesight and reaction times start to suffer.But that's four decades away, and only Tim recommends 40 year old "used cars"
  • Tassos "Baby, Baby light my fire!""Oh God please give me a Kia Forte" --Janis Joplin
  • Tassos The fugly looks of any Subaru, and especially the non-sporty non-elegant, fugly, low-rent looks and interior of the WRX are alone a sufficient turnoff to never want to own one.One can be a 100% car enthusiast but ALSO demand a beautiful AND luxurious vehicle one can be truly proud of and which makes one very happy every time one drives it.The above is obviously totally foreign to Subaru Designers and managers.Αnd who cares if they sell all they make? this is 100% worthless bragging, since they hardly make ANY. ALL of Subaru's models together, all dozen of them, sell less than the top selling Toyota or Honda or even Tesla sells. ANd furthermore, if you have the intellectual horsepower to understand it, bulldude, which I am 99% sure you sure as hell do not, it is NOT about the sales units, it is not even about the sales revenue.It is all about the P R O F I T S.Am I going slow enough for you, bulldude?
  • Thehyundaigarage Am I the only one that sees a Peugeot 508?
  • Lou_BC I realized it wasn't EV's burning by the absence of the usual suspects.