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Jim Chanos: We think Tesla is worth zero [1]

I've never understood why Tesla raised debt. They should have been issuing equity and nothing else, capitalizing on the insane valuation its had for the past 3-4 years. Debt would have been fine if they executed well, but they haven't.

[1] https://www.cnbc.com/2017/12/14/jim-chanos-we-think-tesla-is...

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Yeah, clearly that $1.5 billion in capex equipment is worthless /s

Jim has been trying to make a profit short selling TSLA forever. I can’t take anything he says seriously, crying wolf and all that (although Tesla is going to have liquidity issues at the end of the year if they can’t get their debt refinanced).

TLDR Capital intensive business facing challenges in rising interest rate environment.

If he means the equity is worth 0, then the point still stands. The bond holders would get it.

A broken clock is right twice a day.

This guy has been negative about tesla for years. he needs to be held accountable for being wrong.

Is there a service out there that does rate market/tech prognosticators like this? I agree it'd be useful. There are similar ones for, say, politicians or media in general, but I'd like to see an industry-specific one.

https://www.cxoadvisory.com/gurus/

There are various services (e.g. StarMine) that seek to rate actual (e.g. professional) analyst firms.

But generally speaking, nobody's abnormally right over the long term.

Thanks! Do you happen to know one related to tech predictions? I'm thinking of non-stock related predictions, like "X is working on Y feature to be released by Z".

tipranks.com

I think a service like that misunderstands investing. The old Druckenmiller quote goes, "it doesn't matter how often you are right or wrong; what matters is how much money you make when you're right, and how much money you make when you are wrong."

Has Tesla's stock price defied gravity up until this point? Sure. But eventually it's going to need some real reason why it's the most valuable car company in America. And, as it's bond prices are showing, there are some serious existential risks to its business.

A short still makes way much more sense here.

I think it's fair to take that into account as well, but it's a different measure. One can be interested in accuracy independent of payoff (which of course would be important in investing). A key piece that's missing is the number of failures. People pay attention to the successes.

True, but valuations and predictions don't always follow a simple "right vs wrong" paradigm.

if he's wrong, he's going to lose a lot of money.

i think that's about as accountable as it can get. at least this guy puts his money where his mouth is.

Why? Is being pessimistic a crime? Or just negative opinion about some companies should be forbidden?

> $1.5 billion in capex equipment

Liquidation of specialized, heavy hardware is pennies if not fractions thereof on the dollar. I have my standard-issue Swiss bias against debt, but it seems--with the benefit of hindsight--that issuing debt was a bad call by Tesla.

I think it's a pretty giant euphemism to refer to the possibility of running out of cash before the end of the year as "challenges".

Or, the situation that they run out of money no matter what they do with production

Jim is clearly wrong, and trying to sell you something. Even if Tesla as you know it today goes bankrupt, their assets are worth a lot more together then broken up and sold for parts. The worse case scenario is that tesla is sold off to private equity firm for a fraction of todays market cap, but to say 0 is to make up a story to get a price dip so he can make money on his short positions.

As of last quarter they reported $3.8B of net tangible assets, though the bulk of that is inventory (not worth so much if the company goes away!). Depending on how the next quarterly report looks like it's not hard to imagine negative worth.

They also reported 11B in revenue and 2B in income, those numbers factor in more then just the balance sheet.

They lost $2b, on $11b in revenue. That's the problem!

In the case of a bankruptcy, the assets will be sold to reimburse employee wages, contractors, suppliers and banks first. Only what's left will go back to the stakeholders.

Right, but they have 11b in revenue. They claim to be operating today with a 27% margin on the model S, if an investor dropped the model 3 and focused on producing just the S an investor would easily pay more then the 20b they have in outstanding dept to get that revenue. To claim that a company with that much revenue and that much equipment and investment is worth 0 is so far from being rational.

Your opinion makes me think of the things people were saying about SunEdison before it went bankrupt, and how many people utterly refused to believe the stock was worth zero afterwards.

n.b. I own a very small amount of Tesla stock, and I have no particular opinion of Chanos.

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