When Jim Chanos initiated his thoroughly researched and completely reasonable Tesla short in May of last year, the stock was trading around $215 a share. Over the course of the next year and a half, basically everything he found nauseating about Tesla continued to produce nausea: Executives kept leaving, the debt got worse, estimates were missed and Elon Musk kept on beingElonMusk.
Accordingly, the stock rose about 40 percent between then and now. That made for some stormy weather in Shortville, as Musk would say. But like David Einhorn before him, Chanos isn't going to let Tesla's logic-defying, mathematics-transcending, quasi-religious share performance stop him from tossing more money at the flaming altar of Musk. On Tuesday the Kynikos Associates chief told a Reuters investing summit that he continued to dump funds into his wager against Tesla, offering the same justifications as ever:
“Put it this way,” Chanos said. “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.”
Jimmy-C is not wrong. He could check off a few more boxes if he wanted to: class-action discrimination suits, skyrocketing costs, a generalinability to manufacturecars. But Chanos has neglected to consider one final box, which essentially invalidates all the others:
☒ Is a cult.
Tesla's stock can only go down so far when buffeted by damaging news reports and withering commentaries from bank analysts (at least those who've avoided falling under the spell of Elon). Those kinds of headwinds belong to the physical world of sense and reason; Tesla stock inhabits the spirit realm, where dreams become reality and the divine exists among us.
In other words, there's a whole lot of people out there with Tesla Derangement Syndrome, and the standard set of variables needed for a short to play out are skewed by the distorting force of a charismatic messianic figure. Chanos is no dummy, though. He's considered the Elon Effect, and he has a theory about it:
Chanos…said that he expected company co-founder and Chief Executive Elon Musk to step down from his position by 2020 to focus on his private rocketship company SpaceX as competitors such as BMW and Porsche expand their lines of luxury electric vehicles. “Obviously this is not being valued as a car company, it’s being valued on Musk ... he’s the reason people own the stock,” Chanos said.
Elon's departure would indeed do the trick, so long as Chanos is willing to rack up short losses until 2020. He just needs to make sure we don't experience the singularity before then. Or worse, a spiffy new truck.