This is indeed an honor. Joining us now, he's been extremely active on Wall Street in the last four or five days. James Chanos is with us, founder of Chanos & Company, definitive on the street with a cautious view.
Jim Chanos, honored to have you here. Let me just cut to the chase. What is this distinctive feature that makes SpaceX remind you of Enron?
Well, I don't know that it reminds me of Enron, Tom, but it reminds me of the Enron timeframe. I sat in that. I've always said that Wall Street has a printing press too, just like the Fed. It just takes a while to get going. And one of the things that I think SpaceX is ushering in in 2026 is massive equity issuance. And historically, without a doubt, in the 20th and 21st century, any time you have seen massive IPOs and secondaries relative to the size of the market or the economy, investors generally have been advised to be a little more cautious or reduce the risk. So 1999, 2000, 2021 for the first half of that year, during the meme stock and SPAC craze. We are now going to break records in 2026 for IPOs and secondaries. And SpaceX, of course, is the granddaddy kicking it all off in a big way. But we're going to see OpenAI, Anthropic, and probably some others. So we're going to shatter records. And so it's telling you that right now supply is meeting demand, which we haven't seen, by the way, in '23, '24, and '25, but we're seeing it now in '26.
I looked at Chanos on this, and we've had a wonderful amount of time here with Mr. Chanos. So much to talk about. Scarlett's got some themes, I have some themes as well. Ed Ludlow fronted me. You see how he did that? I just stole my thunder. Chanos is thinking about the neocloud. This is the team here. The New York Times article of a day or so ago: Is SpaceX worth 1.8 gazillion dollars? XAI seems to be suddenly changing its business model from developing models like Grok to basically becoming a neocloud. The entire valuation rests on XAI progress. The neocloud strategy is a commodity business that is valued far lower on the public markets. Jim Chanos to Isaac and the crew over at the New York Times. They're talking innovation, but you're predicting they'll go safe.
Well, what's really interesting, Tom, is that about a week, ten days ago, the vast driver for the SpaceX TAM in their prospectus was the enterprise solutions for XAI. Basically, Grok, what the models produce, write the software. And instead they basically did a 180 pivot and said, we are going to lease out our capacity to Anthropic and Google. And that's the neocloud model, right? That's your equipment lessor. And that is a much lower valued business in the marketplace than being a model company or a hyperscaler. And we've been following data centers for a long, long time. And basically it's a finance business, right? You're buying the chips from Nvidia or somebody else and then you're leasing them out to Anthropic or whatever. It's a rate of return business. It's not a super high-tech business. Yet 22-plus trillion of the 29.5 trillion of SpaceX TAM in their prospectus was based on that business. And it just struck me as very, very odd that right before the IPO they would pivot to a much lower-margin and lower-valuation business than the hopes and dreams, which you guys have mentioned, I've mentioned, based on producing these wonderful AI agent, genetic software products from Grok. And it's one of many head-scratchers about this deal.
At what point does financial reality, the kinds of things you were just talking about, breaking down the numbers, become more important and matter more than the storytelling, the hopes and dreams part of it? Because that's what Elon Musk excels at, and that's what people are buying in on.
So the question is, is this the Elon premium? Is it Elon premium times two or Elon premium divided by two? I think that's really the question here, because there are people who believe in Elon and in Tesla accordingly to well beyond where I think most fundamental analysts think it's worth, because of Optimus robots and autonomous driving and all that good stuff. And now you have another Elon hopes-and-dreams company with an even bigger valuation. And so does that double the value, or does it basically say, okay, well, I'm going to pick one? Because neither of them, let's face it, are being valued on their operations. SpaceX is, I believe, depending on what I heard in the green room, probably now at about 110 times revenues. And just history tells us you just never really make much money buying equities at over 100 times revenues.
Yeah. Well, you, as we know, are inherently skeptical. Your company name is, of course, a skeptic. You're not being a bull on SpaceX or Tesla or Elon Musk, completely tracks. Is there anything in the SpaceX financials or Musk's management of the company that does impress you, that you can say good job on?
Look, I think Starlink's a real business. We can look at their businesses. Again, we have to go in on what's in the prospectus. Starlink's a real business. It's growing. It will probably continue to grow, although its growth is slowing. The launch business is still losing money after 22 years. And I'd be remiss for my fellow glass-half-empty participants if I didn't point out that the rocket that all of this depends upon, Starship, still has not achieved Earth orbit in 12 missions, and half of those ended up with some sort of mishap. So there's a lot riding on all of that. I think Starlink is a real business. It's worth a couple hundred billion dollars. But the real hopes and dreams here is on XAI, which is, by the way, a company they bought in February for 250 billion in stock that the market is now valuing probably well over a trillion and a half dollars.
Bloomberg Television on Bloomberg Radio worldwide with us, Jim Chanos. He could join us today in this historic moment for Wall Street and all of us around the world. So the short crew says Tesla, Tesla, Tesla, someone like SpaceX, and I'm enjoying a 53% per year return since sort of the beginning of COVID, you know, back six years or so. So, you know, again, Tesla has done better than good. And there's a lot of negative free cash flow right now. How long can the optimism of SpaceX keep this going without delivering a more conventional income statement?
Well, I think you answered the question. Right, years have passed, if possible. But Tesla is trading at about 14 times revenues, right? It does have 100 billion in revenues, and it ramped revenues pretty quickly in 2019 and 2020. So there is a real business there in terms of large amounts of revenues and some cash flow. It's not trading at 110 times revenues, and that's a magnitude of difference. I think that's really important for your viewers.
I've got, just for the first time I've ever looked, the same BQ function on the Bloomberg, and of course Chanos nails the price-to-sales because you studied Tom Golden years ago. I've got, well, right now I've got a number of 27 times revenue, and the BQ skewing it maybe a little higher than that. I've never seen a stock like that. So, I mean, I'm glad you guys bring up Tesla because there's this expectation that Tesla and SpaceX will somehow merge or will be combined in the same way that xAI and SpaceX got combined and merged. How are you thinking through that? What does that mean for investors who believe in the Tesla business but are skeptical of SpaceX?
Well, again, if it happens, and I have no idea if it will happen. Does Elon need to make it happen? No, he doesn't need to make it happen. He can keep them separate if he wants to. It's solely up to him. We all know that. But it would be an equity-for-equity deal. And so I don't know how much value that would add in terms of cutting overhead. It's not the story here, right? It's really what these companies will produce in the next five, ten years.
I look at this, Jim Chanos, as a historic moment. And the answers to the cycles that I opened up, talking about Enron and all that. I want you to talk about the short business right now. It's a hugely important part of financial society in this great bull market we're in right now. There's a lot of scars out there. How do you keep that going when you see SpaceX right now? How do you keep a short model going with both sectors and a trend in the broader market?
So through 2023 we were running outside money. Now we run our own money. We've been hedged in the short world since 1996. Basically, our view has been we don't know where the market's going, nor does anybody else. So we'd rather be long the market and short our collection of radioactive companies, if you will. And that's been a very profitable business. And it's been a very profitable business for the last few years too, despite the market hitting new highs, because there have been a lot of stocks, as you guys know, that have lagged dramatically. So our view is always be long the market and be short some percentage of, you know, companies with businesses. And I think that's nothing I would recommend your viewers to do at home. I don't recommend short selling for most people. It's really for the pros, for lots of reasons, things like getting an interest rebate on your shorts and a variety of other things. But I will say that one of the things right now that is very apparent is that insurance is cheap, and it's cheap for all the right reasons.
