Jim Chanos, founder of one of the world’s largest short selling hedge funds, went on CNBC Thursday with guns blazing about new companies whose stocks he sees going lower and an update on one of his old favorite punching bags.
The president of Kynikos Associates, which literally derives its name from the Greek word for cynic, revealed for the first time publicly that he’s targeting four stocks in two industries: fast food and health care. He also stepped up his attack on billionaire entrepreneur Elon Musk and electric automaker Tesla.
Chanos, who has always been very vocal on many of his big trades, was one of the early fund managers to waive the red flag on the one-time high-flying energy giant Enron, which was eventually revealed as fraud. In August 2000, Enron hit an all-time of $90.56 per share. It filed for bankruptcy 16 months later.
Short sellers — unlike investors who buy stocks hoping they will go up — make bets that shares of the companies they see problems with will go down.
Tesla has been a Kynikos short for about four years.
But on Thursday, Chanos said, “I think Elon Musk has crossed the Rubicon in terms of making statements to investors that he might rue later.”
Chanos claimed that Musk “may be misleading investors” by overpromising, citing projections for a new Roadster in 2020 and a semi-truck going into production next year. “I don’t think either of those are going to happen,” he added.
Chanos also said “stunning” recent management turnover at Tesla is a bad omen while he predicted that Musk would leave at some point as Tesla’s CEO and spend more time at SpaceX, the commercial space company he also founded.
Chanos unveiled on CNBC that he shorted Envision Healthcare in the middle of last year and Mednax in 2018.
“I’m betting these companies might be worth nothing,” he said, accusing them of employing business models involving “deception or aggressive use of reimbursement.”
“Both companies have put themselves up for sale hoping that private equity will buy them out,” he added. “‘Winter is coming’ in the U.S. health-care system,” borrowing a line from HBO’s hit series “Game of Thrones,” whose characters have been fearful of an impending long winter for seven seasons.
Chanos announced he’s been short Dunkin’ Brands and Restaurant Brands International for “about a year.”
These companies are “part of a broader theme,” he said, calling it “the franchisers versus the franchisees.”
Chanos said he doesn’t like the business model of companies not owning their restaurants while “basically clipping the coupons, collecting royalties” from the franchises. He also said he sees an end at some point to higher restaurant stock price-to-earnings multiples as the restaurants themselves struggle.
In a Thursday afternoon interview on CNBC’s “Closing Bell,” Dunkin’ Brands CEO Nigel Travis pushed back on Chanos’ call, saying the hedge fund manager was “absolutely wrong.”
“I will completely challenge Mr. Chanos’ assumption that things are going badly at Dunkin’,” Travis said.
Dunkin’ Brands owns Dunkin’ Donuts and Baskin-Robbins. Restaurant Brands owns Burger King, Tim Hortons and Popeyes Louisiana Kitchen.
None of the companies mentioned, except for Dunkin’ Brands, responded to CNBC’s requests for comments.
Kynikos has more than $2 billion in assets under management spread across a short-only fund and a hedge fund. Both funds are flat for 2018, according to sources familiar with the matter. The short-only fund lost 12 percent last year while the hedge fund gained 22 percent in 2017, the sources said.
