Embattled drug maker Valeant (NYSE:VRX) and automaker Tesla (NASDAQ:TSLA) are both controversial for different reasons but they share a common thread: the distain of a world-reknowned short-seller.
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Jim Chanos, who runs Kynikos Associates, has made billions betting on companies and asset classes he believes will fall in value. He is especially concerned about insider stock sales and executive turn over at Tesla and Valeant.
“If you ever see a company where 10 or 15 or 20 people are leaving in the space of a year or two look out."
“If you ever see a company where 10 or 15 or 20 people are leaving in the space of a year or two look out. Two companies in the last 12 months fit that bill, Valeant, Tesla,” said Chanos during an upcoming episode of Wall Street Week which airs on the FOX Business Network every Friday at 8pm ET.
Valeant’s problems have been well documented over the course of the past year. Earlier this month the company reported disappointing 1Q results and cut its outlook for fiscal 2016. New CEO Joseph Papa blamed the turmoil of the past year for the poor performance. Despite the unwavering support of activist investor Bill Ackman the stock has lost 90% of its value, which has likely benefited Chanos who says he has been betting against the drugmaker for a long time.
“I just never understood the model and I still don’t understand the model..."
“I just never understood the model and I still don’t understand the model of this whole speciality pharma where you buy drugs, one offs or small drug companies and then hike the prices eightfold or tenfold. And I keep coming back to, why didn’t the company that owned these drugs originally do that, the problem was the reimbursement system and that’s what’s broken at this point, the payers have woken up.”
As for Tesla, on Friday the company said there was no safety defect in its Model S or Model X, and that the U.S. National Highway Traffic Safety Administration (NHTSA) had not opened any investigation or any "preliminary evaluation" on the matter, as reported by Reuters.