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]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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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.
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.