In Latest Cash Equity Transaction, SolarCity Grabs $305M

In Latest Cash Equity Transaction, SolarCity Grabs $305M

"A lot of people aren't paying attention to the actual financial statements" of the companies and the risks for Tesla, Chanos said at the CNBC Institutional Investor Delivering Alpha Conference in NY.

So if Chanos is calling the electric auto maker out, to put it quite bluntly, as a "shameful example of corporate governance at its worst", for its objective to deal in the works to take over SCTY, it is not a great time to be TSLA CEO Elon Musk.

In addition, Tesla needs to raise "a lot" more capital either by the end of 2016 or beginning of 2017, Chanos said.

Chanos had previously disclosed his bet against the shares of both companies in the spring.

The firm knew SolarCity was "running out of options quickly", but "never dreamed" that Tesla would try to convince shareholders to approve a merger with the company, he said. Since then, the giant's stock has crashed 90% in trading. He estimated that the combined company, which will depend on access to the capital market, could have a cash burn of roughly $1 billion per quarter.

"Buried in the merger proxy was an interesting disclosure" that the Tesla board passed on giving SolarCity a bridge loan, he said. SolarCity has been under pressure, missing recent financial targets and continuing to lose money. He called the Tesla-SolarCity deal as a "walking insolvency", noting that the "synergies are questionable at best". "This is anything but", Chanos said of Tesla.

The big difference between Tesla and Amazon: While Amazon may have lost money on the bottom line, it always had enough revenue coming in that it never needed to go back to the capital markets to raise outside funds since it went public nearly two decades ago, Chanos said.

Chanos also said that the deal between the two companies "to in effect bail out the shareholders of SolarCity...[s] trikes us as just the height of folly". (NASDAQ:AMZN) founder Jeff Bezos, as the short-seller makes his criticism known that borrowing from capital markets is not the ideal strategy.

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