Jim Chanos mentions how he thinks executives leaving em masse is a huge red flag.

by kjk

You have to understand that in this specific case Jim Chanos is not offering a statistically proven wisdom but picking facts to feed a narrative that serves his interests.

Jim Chanos is a Tesla short.

His interest is served by Tesla stock going down.

He is invited on TV where he spins narratives that serve his interests.

A narrative that serves his interest is “Tesla is a bad company and you should sell their stock”.

If Tesla stock goes down, he makes a lot of money.

If Tesla stock goes up, he looses a lot of money.

This guy plays with $2 billion dollars. In 2017 his hedge fund lost 10.7% i.e. 200 million dollars, in part because he bet against Tesla (www.bloomberg.com/news/articles/2017-10-12/chanos-s-short-hedge-funds-decline-this-year-amid-stock-rally). In that period S&P was 16% up, so he under-performed S&P by 26%.

He picks facts that support “Tesla is a bad company” and put the most negative spin on them.

Did a few somewhat senior people left Tesla recently? Yes.

Was it “en mass”? Not at all.

Are they abandoning sinking ship and jumping to better pastures? I’ve looked at those departures a bit and it doesn’t seem so. One guy left to start his own battery company. Two guys haven’t found a new job in several months (according to their Linkedin profile), which doesn’t look like ship jumping situation etc.

Do they know some secret that is not reflected in Tesla’s stock price (which is still decent)? If yes, then makes you think why other executives are still there.

Did Tesla have a problem replacing them with BMW/Amazon/Facebook/Apple/SunPower/GM/Walmart veterans? (www.tesla.com/blog/welcome-sanjay-shah-and-jan-oehmickewww.tesla.com/blog/welcoming-new-talent-tesla?redirect=no). Not at all.

I’m not saying that a massive exodus of executives wouldn’t be bad.

I am saying that I don’t know a single public company where senior executives left “en masse” and then the company tanked. GM executives didn’t jump ship before GM went bankrupt. Neither did Enron execs. Nor Blackberry. Pick any company that really tanked and see if you can spot exodus of senior executives before that happened. Or even after that happened. Normally executives have to be fired by the board for lack of performance and it usually ends with the CEO.

I am saying that Jim Chanos has a vested interest in making you think that insignificant staff turnover is “mass exodus of executives”.

 

 

Disclaimer: Consult your financial professional before making any investment decision.

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