Prominent short seller Jim Chanos took aim at the highly anticipated IPO of SpaceX, warning the Elon Musk-led space company's offering is fueled by "hopes and dreams" that do not justify its astronomical valuations.
SpaceX is set to go public in New York on Friday following an offering that seeks to raise $75 billion at a valuation of $1.75 trillion. Itis set to be the largest initial public offering, dwarfing the 2019 Saudi Aramco listing by nearly threefold.
"The company is not worth, in my opinion, $1.75 trillion based on any reasonable assumptions over the next five years," Chanos said at an iConnections conference in New York on Wednesday.
Skepticism over the company's targeted $1.75 trillion valuation, coupled with governance concerns, has led some analysts to view it as a logical short.
However, several short sellers are wary ofbetting against SpaceX, adopting a wait-and-watch stance, especially after a recent rally in trillion-dollar technology heavyweights - a group SpaceX could join - has inflicted steep losses on bearish bets.
Chanos voiced a similar opinion when asked if he would short the company.
"We really can build whatever stories we want - colonies on Mars, factory tunnels, data centers in space - to justify the valuation. In bull markets, you put a premium on promises and in bear markets, you put a discount on reality," he said.
Shorting Musk's other company, Tesla, has generally been a losing bet. On paper, Tesla short sellers have lost $27 billion since June 2021, including both directional bets against Tesla shares and index hedges used to account for Tesla's inclusion in the S&P 500, according to S3 Partners. Over the last 10 years, shares have risen more than 2,500%.
Chanos, however, called SpaceX a 'different animal' than Tesla. He pointed out that the space company is being valued at 90 times its sales, compared with Tesla's 14-times multiple.
DATA CENTER SECTOR A 'BAD BUSINESS'
The veteran short seller also cast doubt on the economics of the data center sector, calling it a "bad business" with low-single-digit returns on capital.
Chanos has been bearish on data center operators since 2022, arguing that traditional operators and emerging neocloud firms resemble REITs or equipment leasing companies rather than high-growth technology plays.
By buying advanced chips from suppliers such as Nvidia and leasing them to hyperscalers, these companies face heavy depreciation risks and limited pricing power, he said.
Chanos added that such businesses are effectively price-takers and should not command valuation multiples higher than semiconductor makers that control hardware supply.
Jim Chanos is a prominent American investment manager and founder of Kynikos Associates. A renowned short seller, he is best known for accurately predicting, and profiting from, the collapse of Enron in 2001.
