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General News

Jim Chanos Featured in Wall Street Journal for ‘Going into Hibernation’

November 23, 2023

NEW YORK – Jim Chanos, the Greek-American hedge fund manager, was featured in the Wall Street Journal (WSJ) as “Wall Street’s best-known bear is going into hibernation.”

“After nearly four decades, Jim Chanos is shutting down hedge funds he manages that wager against companies he believes are overpriced or fraudulent,” WSJ reported on November 17, adding that “his career as a short seller spanned a contrarian bet against Enron that paid off when the energy trader collapsed as well as years-long, money-losing campaigns against Tesla and AOL.”

“More recently, Chanos has struggled to turn his pessimistic positions into profits while markets generally moved higher,” WSJ reported, noting that “his firm, Chanos & Co., manages less than $200 million today, down from $6 billion in 2008, and its funds are down 4% so far this year, while the S&P 500 is up 19%, including dividends.”

“Shares of Tesla are up about 90% this year, and the electric-vehicle maker is one of the world’s most valuable companies,” WSJ reported.

“The marketplace for what I do has changed,” Chanos, 65, told WSJ, adding that “he expects to return most of his investors’ cash by Dec. 31.”

“Chanos will continue to operate his firm but will focus on doing advisory and research work for select clients and running certain separately managed accounts,” WSJ reported, noting that “he says he’s lately been shorting high-price data-storage companies and real-estate investment trusts, which he says will be hurt as interest rates stay elevated.”

“He also plans to keep posting on Twitter, the social-media platform now known as X, where his account, @WallStCynic, broadcasts criticisms of what he sees as analysts’ and investors’ over-exuberance to over 133,000 followers,” WSJ reported, adding that “Chanos first made a name for himself as a bearish junior analyst at Gilford Securities in 1982 when he urged clients to bet against Baldwin-United, a highflying maker of pianos that had expanded into insurance, months before it filed for bankruptcy.”

“He assumed an unusually public role as a stock-market scold,” WSJ reported, pointing out that “though other short sellers preferred to operate below the radar, Chanos seemed to enjoy the spotlight.”

“He regularly took to television and industry conferences, including his own ‘Bears in Hibernation’ gatherings,” WSJ reported, adding that “targets of Chanos were so bothered that they sometimes hired private investigators to dig up dirt on him and complained to the Securities and Exchange Commission.”

“People think I have two horns and spread syphilis,” Chanos told WSJ in a 1985 article.

“Later that year, he left his job as an analyst, raised $16 million and launched a hedge-fund firm, originally named Kynikos Associates after a Greek word for ‘cynic,’” WSJ reported, noting that “in the 1990s, Kynikos secured an investment from the Ziff Brothers, billionaire backers of hedge-fund managers including Bill Ackman. (In 2022, the name of the firm was changed to Chanos & Co.)”

“Chanos’ breakout moment occurred in 2001,” WSJ reported, adding that “he had set his sights on Enron, a gas-pipeline company that had morphed into a big player in energy trading and became a Wall Street darling.”

“After studying Enron’s filings, Chanos flagged disclosures that pointed to risky related-party and off-balance-sheet transactions,” WSJ reported, noting that “he concluded that the company was a ‘hedge fund in disguise.’”

“In 2001, Enron disclosed that regulators were investigating the Houston-based energy company before its collapse,” WSJ reported, adding that “that autumn, Enron announced a surprise loss and a regulatory investigation.”

“It collapsed into bankruptcy before the end of the year in one of the biggest cases ever of corporate fraud and malfeasance,” WSJ reported, noting that “several Enron executives went to prison.”

“Ahead of the 2008-09 financial crisis, Chanos issued warnings about a potential credit and banking crisis and his funds scored gains when the markets tumbled, though they paled compared with those of others who didn’t specialize in shorting, like John Paulson,” WSJ reported, noting that “Chanos followed that up with wagers against companies that would suffer from a slowdown in the Chinese economy.”

“The crash that Chanos predicted took years to arrive,” WSJ reported, adding that “by 2015, bearish Chinese positions accounted for about one-fifth of the holdings in Kynikos’ global funds, and the firm produced gains when Chinese stocks sold off that summer.”

“Some of Chanos’ targets took him to court,” WSJ reported, noting that “casino magnate Steve Wynn brought, and later lost, a slander lawsuit against Chanos in 2014 after the short seller suggested that Wynn Resorts may have broken anticorruption laws.”

“Insurer Fairfax Financial Holdings accused Kynikos and other hedge funds in 2006 of coordinating bets against the company; a judge dismissed the case against Kynikos,” WSJ reported.

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