Jim Chanos Is Still Short Tesla
Short sellers have long targeted Tesla shares and currently have almost a $10 billion bet against the Tesla according to data from the financial analytics firm S3 Partners. The 28 million shares shorted amount to 21% of total shares outstanding, according to S3.
One of the more famous short sellers is Jim Chanos. Jim Chanos is an American investment manager and currently serves as president and founder of Kynikos Associates, a New York City registered investment advisor who is focused on short selling. Two months ago he said Grubhub was a short due to Grubhub’s inability to make any money on each order. Weeks later, Grubhub announced dismal earnings and the stock tanked.
A rumor some weeks ago that Jim Chanos covered his shorts on Tesla, but it was in fact just a rumor.
What concerns Jim is that Tesla’s valuation within a capital intensive business, making cars. Jim thinks the Model S is a great car, but the competition is knocking on the door. In addition, he feels demand for the Model 3 in North America has peaked. And lastly, Jim feels Elon’s behavior is “promotional,” meaning he promises the world, but under delivers.
Well one analyst buying that promise is Alexander Potter of Piper Jaffray.
Piper Jaffray analyst Alexander Potter increased his price target on Tesla Inc. shares TSLA, +0.40% to $423 from $372 late Monday, writing that "it's hard to find a more impactful disrupter than Tesla." He argued that while Tesla has always had a strong mission and loyal base of customers, more recently the company has demonstrated impressive capabilities. "These include high-volume manufacturing, impressive opex control, and frugal capital spending," he wrote. Potter is also upbeat about Tesla's newly announced Cybertruck pick-up truck, which has been a controversial subject since its reveal.
Elon introduced the Cybertruck to the world at its Design Studio in Hawthorne, California, just outside Los Angeles. The design is suspect, but at least it made of the same stainless steel alloy that's used for SpaceX rockets, making the truck bulletproof. Elon claims it can in tow and haul more than a Ford F-150 and perform as a better sports car than a Porsche 911….it’s was an instant smash.
In late September, Tesla reported strong third-quarter earning results, posting a surprise profit. Analysts were expecting a loss. Elon told the press that they were ahead of schedule with a new factory in Shanghai. On the news, the stock jumped 20% and in the process, short sellers lost $1.4 billion that day.
So is Jim Chanos and the rest of the short sellers in for more pain, the chart suggests more pain is in store at least until the $380 level.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.