Like many firms Tesla Motors Inc attracts short sellers who look to profit from the company’s downfall; Jim Chanos is one of those shorts. Chanos has built a reputation as a short seller and when he talks, the bears tend to listen and act on his words. Chanos has never hidden his dislike for Tesla, and he doesn’t pass up a chance to tear down Tesla’s stock, its management, and it products.
Chanos is out to draw blood again on Tesla with barbs directed at the firm for the loss of key execs from its management. Chanos seems to have valid grounds for his attacks, and today’s trading session will be messy as the bulls and bears slug it out.
Tesla Motors is treading the same path of doom that Valeant trod
Jim Chanos says the exodus of key management executives from Tesla Motors Inc is a source of concern. Of course, executives can join or exit a firm for thousands of reasons but executives don’t just leave a company in droves – certainly not from a revolutionary firm that wants to change the world.
Now, Chanos says the firm might end up having the same fate as Valeant Pharmacuticals if its execs continue to leave. In his words, “the last high-profile company that we saw with such a similar large number of senior executive departures was Valeant”. You might not know much about Valeant if you don’t invest in the pharmaceutical sector. However, Valeant’s stock has crashed by 90% in the last one year after its executives started leaving.
Valeant has been stuck in massive bear hug for almost two years after the first wave of executive departure began. Most of the Valeant bulls of old have exited the stock because of its massive plummet. In fact, the few remaining investors are only waiting for the stock to climb up so that they can sell and make good riddance of a lemon stock. Tesla and Valeant operate in different industries but Chanos might have a valid point with his thesis that the exit of executives is a sign of troubles on the horizon.
In May, when Tesla lost its VP of Production and VP of Manufacturing, Chanos was out with a word of caution for the bulls. He noted that the exit of both execs at about the same time was not a good sign. In his words, “historical signposts of a company in trouble is when numbers of senior people leave over a short period of time.” He goes on to say that “Tesla fits that bill. … We have all kinds of questions about the profitability of the business,”
Tesla hires execs as fast as it losses them
Nonetheless, Chanos words about potential troubles at Tesla Motors might turn out to be a false alarm in the grand scheme of things. Sure, Tesla is losing its key executives; in fact, the firm has lost 8 executives in the first six months of this year. The firm has also lost 10.7% of its share price in the same period. However, the exit of the execs might be a function of irreconcilable differences and not necessary because they can foresee doom in the future for Tesla.
More so, Elon Musk has been doing a great job of making sure that the exit of those executives does not create a vacuum at the firm. He has been hiring executives from rival firms as fast as he loses his own execs to rivals. In May, Musk hired Peter Hochholdinger Audi’s executive president of Vehicle Production. Hochholdinger brings valuable wealth of experience from building premium luxury cars at Audi and he will improve the manufacturing program for the Model S, Model X, and the upcoming Model 3.