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Why One Short-Seller Describes the Tesla-SolarCity Merger As ‘Crazy’

September 13, 2016

Business Leaders Converge In Sun Valley, Idaho For Allen And Company Annual MeetingBusiness Leaders Converge In Sun Valley, Idaho For Allen And Company Annual Meeting
Elon Musk, CEO and CTO of SpaceX, CEO and product architect of Tesla Motors, and chairman of SolarCity, attends the Allen & Company Sun Valley Conference on July 7, 2015 in Idaho. Scott Olson/ Getty Images

The prominent short-seller Jim Chanos, founder of Kynikos Associates, called the proposed merger of Tesla Motors and SolarCity “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. He had previously disclosed his bet against the shares of both companies in the spring.

“A lot of people aren’t paying attention to the actual financial statements” of the companies and the risks for Tesla, Chanos said at the CNBC Institutional Investor Delivering Alpha Conference in New York.

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Tesla (TSLA) and SolarCity (SCTY) chief Elon Musk’s vision relies heavily on borrowing from the capital markets, Chanos said, noting that this contrasts with the approach of Amazon.com (AMZN) founder Jeff Bezos.

“This is the anti-Amazon,” Chanos said. “What made Amazon great … is that they didn’t need capital.”