The prominent short-seller Jim Chanos, founder of Kynikos Associates, on Tuesday, called the proposed merger of Tesla Motors Inc (TSLA.O) and SolarCity Corp (SCTY.O) “crazy,” noting that the combined company would need constant access to capital markets.
Chanos said it would be the “height of folly” for Tesla shareholders to vote to bail out SolarCity, which he added has an “uneconomic” business model.
Chanos estimates the combined company could have a cash burn of roughly $1 billion per quarter.
“To burden your own balance sheet and cash flow statement to, in effect, bail out shareholders at SolarCity strikes us as just the height of folly,” he said at the CNBC Institutional Investor Delivering Alpha Conference in New York.
Chanos had previously disclosed his bet against the shares of both companies in the spring.
SolarCity shares were down about 5.4 percent in late trading and shares in Tesla were down about 2 percent.
Chanos, who rose to fame in the hedge-fund world predicting the collapse of Enron Corp in 2001, was reminded by the panel moderator that Tesla never seems to have trouble raising equity or debt.
Chanos responded: “Until they do.”
“A lot of people aren’t paying attention to the actual financial statements” of the companies and the risks for Tesla, Chanos said.
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Source: Reuters.com
