Jim Chanos is shutting down hedge funds he managed for decades that wager against companies he believes are overpriced or fraudulent. VICTOR J. BLUE/BLOOMBERG NEWS
By
Gregory Zuckerman
and
Peter Rudegeair
Nov. 17, 2023 5:30 pm ET
94
Wall Street’s best-known bear is going into hibernation.
After nearly four decades, Jim Chanos is shutting down hedge funds he manages that wager against companies he believes are overpriced or fraudulent. His career as a short seller spanned acontrarian bet against Enron that paid off when the energy trader collapsedas well as yearslong, money-losing campaigns against Tesla and AOL.
More recently, Chanos has struggled to turn his pessimistic positions into profits while markets generally moved higher. His firm, Chanos & Co., manages less than $200 million today, down from $6 billion in 2008, and its funds are down 4% so far this year, while the S&P 500 is up 19%, including dividends. Shares of
Tesla
are up about 90% this year, and the electric-vehicle maker is one of the world’s most valuable companies.
“The marketplace for what I do has changed,” Chanos, 65, told The Wall Street Journal. He expects to return most of his investors’ cash by Dec. 31.
Chanos will continue to operate his firm but will focus on doing advisory and research work for select clients and running certain separately managed accounts. He says he’s lately been shorting high-price data-storage companies and real-estate investment trusts, which he says will be hurt as interest rates stay elevated.
Jim Chanos, with hand to chin, appeared on the ‘Titans at the Table’ television program in 2012. PHOTO: JIN LEE/BLOOMBERG NEWS
He also plans to keep posting on Twitter, the social-media platform now known as X, where his account, @WallStCynic, broadcasts criticisms of what he sees as analysts’ and investors’ overexuberance to over 133,000 followers.
Chanos first made a name for himself as a bearish junior analyst at Gilford Securities in 1982 when he urged clients to bet against Baldwin-United, a highflying maker of pianos that had expanded into insurance, months before it filed for bankruptcy.
He assumed an unusually public role as a stock-market scold. Though other short sellers preferred to operate below the radar, Chanos seemed to enjoy the spotlight. He regularly took to television and industry conferences, including his own “Bears in Hibernation” gatherings.
Targets of Chanos were so bothered that they sometimes hired private investigators to dig up dirt on him and complained to the Securities and Exchange Commission. “People think I have two horns and spread syphilis,” Chanos told the Journal for a 1985 story.
Later that year, he left his job as an analyst, raised $16 million and launched a hedge-fund firm, originally named Kynikos Associates after a Greek word for “cynic.” In the 1990s, Kynikos secured an investment from the Ziff Brothers, billionaire backers of hedge-fund managers including Bill Ackman. (In 2022, the name of the firm was changed to Chanos & Co.)
Chanos’s breakout moment occurred in 2001. He had set his sights on Enron, a gas-pipeline company that had morphed into a big player in energy trading and became a Wall Street darling. After studying Enron’s filings, Chanos flagged disclosures that pointed to risky related-party and off-balance-sheet transactions. He concluded that the company was a “hedge fund in disguise.”
In 2001, Enron disclosed that regulators were investigating the Houston-based energy company before its collapse. PHOTO: GETTY IMAGES
That autumn, Enron announced a surprise loss and a regulatory investigation. It collapsed into bankruptcy before the end of the year in one of the biggest cases ever of corporate fraud and malfeasance. Several Enron executives went to prison.
Ahead of the 2008-09 financial crisis, Chanos issued warnings about a potential credit and banking crisis and his funds scored gains when the markets tumbled, though they paled compared with those of others who didn’t specialize in shorting, like John Paulson. Chanos followed that up with wagers against companies that would suffer from a slowdown in the Chinese economy.
The crash that Chanos predicted took years to arrive. By 2015, bearish Chinese positions accounted for about one-fifth of the holdings in Kynikos’s global funds, and the firm produced gains when Chinese stocks sold off that summer.
Some of Chanos’s targets took him to court. Casino magnate Steve Wynn brought, and later lost, a slander lawsuit against Chanos in 2014 after the short seller suggested that
Wynn Resorts
may have broken anticorruption laws. Insurer
Fairfax Financial Holdings
accused Kynikos and other hedge funds in 2006 of coordinating bets against the company; a judge dismissed the case against Kynikos.
