The short seller Jim Chanos is short one of Carl Icahn’s activist targets, Cheniere Energy (NYSE: LNG).
To start, Icahn owns 8.2% of the company and just got two representatives put no the board.
On the other side is Chanos’ Kynikos Associates. Chanos notes – “We’ve been pretty negative for the past six months on this LNG space. We think it’s a looming disaster.”
In his first-quarter letter to investors of Greenlight Capital, David Einhorn lashed out at regulators. He claimed that the market is "fractured and possibly in the process of breaking completely." Q1 2021 hedge fund letters, conferences and more Einhorn claimed that many market participants and policymakers have effectively succeeded in "defunding the regulators." He pointed Read More
In reality, everything ties back to Asia for Chanos, more specifically China. Chanos says, “It’s a little bit tied into Asia … LNG was seen as a savior of a lot of natural gas plays, a way to basically satiate the incredible demand for energy out of Asia. The problem is … everybody figured it out … at the same time.”
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Chanos said that the risk-reward is skewed toward the risk side with LNG trading at 30 times 2020 earnings. Of note – “LNG demand isn’t growing anymore. We already have excess capacity, and we’re about to pretty much almost double the capacity globally over the next four years.”
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The biggest risk to Chanos is a buyout – LNG has a lot of infrastructure in place that could attract a Willaims Companies or Kinder Morgan.