Carl Icahn is facing off with Jim Chanos on Cheniere Energy after raising his long bet on the company, according to a regulatory filing with the Securities and Exchange Commission this morning. Chanos has a significant short position in Cheniere and bad-mouthed the company on CNBC earlier this month.
Shares of Cheniere Energy ticked higher briefly in early trading this morning after the news came out. Looks like Cheniere Energy is becoming a battleground stock among hedge fund titans.
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Carl Icahn reps join Cheniere board
Last month, Carl Icahn reached a deal to add two of his chosen representatives to Cheniere Energy’s board of directors. Funds under Icahn’s management now hold 22.7 million of the company’s outstanding shares, amounting to a stake of approximately 9.59%. In early August, Icahn’s funds held a stake of 8.18% in Cheniere, and the activist investor said at that time that the company was undervalued.
Icahn started adding to his position in the energy company on Sept. 9, which is the same day Jim Chanos called Cheniere a “looming disaster” on CNBC. Chanos said his view on Cheniere is “a little bit tied to Asia,” reports Business Insider, although the liquid natural gas (LNG) provider hasn’t turned a profit in over two decades. Chanos also said demand for LNG is no longer growing.
Why Icahn likes Cheniere
So why on earth would Carl Icahn be so enthusiastic about a company like Cheniere, which somehow has remained afloat despite not even turning an operating profit for four years, not to mention the 20 years the company hasn’t turned an overall profit?
According to Investor Place, Icahn and others who are going long on the LNG supplier are betting on the company’s future exports. Cheniere is building some new facilities and expects to finally be able to export large amounts LNG after those facilities are finished. Icahn is essentially betting that demand for LNG will increase, giving Cheniere a place to ship all of that product. The company has contracts to sell gas for billions of dollars per year, according to The Wall Street Journal.
In raising his stake in the company, some think Icahn might be trying to trigger a short squeeze, reports Street Insider. As of this writing, shares of Cheniere Energy were up 1.55% at $54.98 per share. The stock has fallen by more than 20% so far year to date.