Since it's that part of the lunar cycle again, Jim Chanos returned Wednesday night to his habitual perch at Bloomberg to inveigh against the insult to human reason and financial capitalism that is Tesla Inc. Being short a story stock means talkingyour book at every possible opportunity, and Chanos's latest outing doesn't disappoint:
Three years ago, this company was supposed to be making money now. Now it’s supposed to be making money by 2020. And I’m guessing by 2019 we’ll hear about 2025.
More of the same, however, doesn't equal a short thesis. Tesla has a way of turning investors into Captains Ahab. So what if Tesla isn't making money? If shareholders still believe in the Muskian dream, what does it matter if Tesla never makes a dime?
But for Chanos, it's not more of the same. Tesla is “headed for a brick wall,” the likes of which even the most diehard Teslaphiles haven't experienced. In essence, Musk is losing what made his vision unique. A few years ago, when every other electric offering was some “small little bug-like” product, Chanos said, Musk for the first time made electric vehicles “sexy” and “cool” and “aspirational.” But Tesla won't remain an outlier for long:
The problem [Musk] now has, as we’ve seen in the last two weeks with the Mission E rolled out by Porsche, which will come out in 2019, is that the competition is coming out with sexy sport cars and high end vehicles. This is going to be the reality by 2019, and that’s a different animal. You now have lots of competition, you have well-financed profitable companies competing against you.
This basically sums up Chanos's thesis, along with the obvious fact of Tesla's financial insecurity and the theory that Musk will board the last rocketship out of Planet Tesla before it implodes. Who could argue with that?
Stanley Druckenmiller, for one. Appearing on CNBC Wednesday, the Druck fielded a question on his opinion of Tesla, which seems exactly the sort of overleveraged, highly speculative stock he'd enjoy shorting. “I'll tell you a funny story,” Druckenmiller began...
I had a guy who managed some money for me come in when the stock was $82. And I think I was 62. [Note: This chronology is incompatible but whatever.] I had given myself a Tesla for my sixtieth birthday. And he had this incredibly effective analysis, like 20 pages of financials about why Tesla was a short. And at then end of this presentation – really well thought-out – I said, “Have you ever driven the car?”
And he said, “No.” And I sent him his redemption notice the next week.
This is the kind of storybook hedge-funder move that makes Druckenmiller such an O.G. Oh, you think Tesla's finances are a nightmare shitshow of Enron-like proportions? Well you, sir, haven't personally experienced Ludicrous Mode.
Still, even though driving a Tesla around makes Druckenmiller feel young enough to bludgeon a sovereign country's currency again, it hasn't turned him into a Tesla long:
I don’t put Tesla in the Amazon category. They have not proved to me that as a financial model, an economic model, it’s going to work. But I also don’t like to short great products, that’s not my deal.
So what would a 62(?)-year-old Druckenmiller have said to Chanos a few years ago had the Kynikos Associates chief come to him with his fully developed Tesla short? Turns out, Chanos has driven a Model S (“they're great!”), so at least he passes that test. As for the rest of the thesis, who knows. One of them is right for the wrong reasons and the other is right for the wrong reasons. We just don't know who's who yet.