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.”
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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.