Jim Chanos

Jim Chanos was short Herbalife but no longer has a position. However, Jim Chanos does believe that Bill Ackman’ thesis is correct. Chanos made these statements in an interview with CNBC this morning. The famous short biased hedge fund manager has long been suspected of having a position in the MLM. The full video is embedded below and the computer generated transcript is beneath the video:

H/T Julia La Roche

expenses to read and consider carefullybefore investing. jim chanos continuing our conversation. we’re going to talk dell and herbalife. you know what i think of you. herbalife, isn’t it? it’s herbalife. it’s herb greenberg — anyway. you know what i think of you. you started, you were 20 years old. you figured out baldwin united which was a piano company that was going to take over the world with its annuities and it went to zero. did the same thing with enron. you have no position in herbalife. right? but you did have a position? we were short last year. why did you cover your shorts? we were short at a price. mean, i’m not crazy for this multilevel marketing business. i think bill ackman is correct in his analysis, and that when your business is based, in effect, on selling an overpriced commodity to your customers, or your distributors, you ultimately have a flawed business down the road. and, you know, at 50 bucks this was trading at market multiples. no multilevel operating company — if you can figure out enron you can certainly figure out whether this crapy sell which i don’t even know what it is. soy stuff? dietary supplements. does it have any value whatsoever to help anyone? no. no, basically. so you give — and it probably says on the label, not shown to not be effective at doing anything probably. but it may not hurt you. and the bull case is well yes, but they’re selling support. ie people go to the herbalife centers — i could go to a gnc store and half the stuff on those shelves i could throw in the dumpster. you can buy weight watchers, too. is but you think it’s kind of a — i just think at the end of the day, if you’re selling a bad product or an overpriced product in a competitive marketplace it’s not anything you want to put a multiple on. why did you cover your short, though? the stock almost got cut in half. you are short dell. we are short dell. we covered our dell short in single digits last year and shorted it into the deal. and there are some compelling reasons to be short in your view. yeah, the business. all this is going on we’re focusing as you say on personalities the herbalife personalities, with this personalities. and not enough attention is paid to the business. and the business is not going well you say. no, dell, the business is not going well at all. in what way? the cash floe is plummeting. it dropped from 4.something billion dollars to 2.7 billion in the last fiscal year. and i think it’s going to drop some more. what were you talking about with the ongoing business payable or receivable? a lot of people look at the cash, and i mean, problem with the dell model is, is that you get paid up front. and that’s a great model when your business is growing. because more cash comes in, you know, before the payables. as your business shrinks it works the other way. although dell has a lot of cash, most of it offshore, which is a whole separate issue, there’s tons of payables here. so the networking capital, which is wt you should look at, not net cash, is only a few billion dollars. we’ve got the letter from carl icahn, this is the letter that carl icahn sent to the dell board after the deal that he owned a 6% stake david faber was reporting that yesterday he breaks it down like this, he gets to a valuation of about 22.81 a share which is a 6r7% premiu the 13.65 per share price in thaproposed transaction. he breaks it down this way, he says, you know, we value the pro forma stub at 13.81 using discounted methodology — what’s that methodology? he says it’s based on a consensus of analyst forecasts. oh, okay. so then he says that going in they want a $9 a share — the same analysts that were recommending it from 30 on down? it could be. that’s why i want you to go through these numbers with me. in this letter he says he wants a $9 special dividend if this transaction doesn’t happen and he’d like to see it from the following sources. 426 a share or 7.4 billion from available cash as proposed in that going private transaction. he wants $1.73 a share or about $3 billion from factoring existing commercial and consumer receivables as proposed in the transaction, and $4.26 a share or about $5.25 billion in new debt that would be loaded onto that. is that a legitimate valuation? i would come at it from the other side of the telescope. not how much debt you put on this thing. i guess bankers will lend. why any banker would lend on this deal to make a spread over libor is beyond me. but deal has negative tangible equity. and even if you add back plant equipment, it’s still has roughly negative tangible or zero equity. so all of these assets, while they’re somewhat unencumbered because of working capital, at the end of the day have liabilities against them. if you — and so you have to worry about your suppliers. you have to worry about the real world as opposed to financial engineering. and this is a declining business. they sell pcs. over 70% of their revenue are