- Mike Segar / Reuters
Famed short-seller Jim Chanos was on a stock-picking panel at the CNBC and Institutional Investor’s Delivering Alpha Conference in NYC.
“I want to talk about what is not too boring – the world of Elon Musk,” he said.
Specifically, Chanos is talking about Tesla merging with SolarCity.
“Just to underscore … what kind of damage this merger will do to Tesla shareholders, we ran a Z-score.”
A Z-score is a predictor of bankruptcy.
“The bottom line is that Tesla, which was slightly above the red line, puts itself well under the red line by buying SolarCity,” he said. “The combined SolarCity and Tesla, which we think will have a cash burn of a$1 billion a quarter, will constantly need access to capital markets.”
Chanos argued that SolarCity’s model is just uneconomical – and he’s made this argument before – yielding no value to Tesla at all.
“To burden your own balance sheet with the kind of business … strikes us as the height of folly.”
When the Tesla board was approached to do a bridge loan for SolarCity, Tesla “punted,” Chanos said.
“Yet they’re going to buy the equity at a premium. Again, this is puzzling to any student of corporate governance.”