Jim Chanos' Short Sparks a Rough September for Cheniere Energy's Stock

LNG Chart

What: Shares of Cheniere Energy and its subsidiaries Cheniere Energy Partners and Cheniere Energy Partners Holdings all took a beating when well known short seller Jim Chanos announced that he had taken a short position in Cheniere Energy, stating that the market for LNG was oversupplied in the near term and that shares of Cheniere were wildly overvalued.

So What: Whenever someone like Chanos puts a company in his sights, the market has a tendency to listen. In an interview with CNBC, Chanos explained how the recent bevy of new LNG supply terminals that are all hitting the market at once will lead to a large oversupply of LNG over the next couple of years and many of the lucrative contracts that companies signed a couple of years ago may end up being renegotiated. More so, Chanos saw the Cheniere' stock -- a company that is a pure play in LNG -- as way to expensive. At the time of the interview, the company's stock was valued at more than 11 times the company's projected EBITDA in 2021.

LNG data by YCharts

The reason that values of all the Cheniere entities started to rebound toward the end of the month came when another famous investor, Carl Icahn, announced that he has upped his stake in Cheniere to 11.4% of the entire company and will receive a couple board seats.

Now What: Investing in Cheniere Energy today really depends on your time horizon. Jim Chanos probably has a point about shares of Chniere Energy being too expensive today. The amount of time before it will grow into its earnings at today's prices seems like a large opportunity cost.

However, the company's Sabine Pass plans to ship its first cargoes by the end of the year and be ramped up to full capacity in 2016. This makes an investment in Cheniere Energy Partners -- a direct investment in just this facility -- a more lucrative investment worth looking at. More than 85% of the facilities are under rather lucrative contracts and there are no rumors of renegotiated contracts right now. With shares trading with e distribution yield north of 6%, Cheniere Energy Partners looks much more compelling than its parent company.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Jim Chanos' Short Sparks a Rough September for Cheniere Energy's Stock originally appeared on

Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.comor on Twitter @TylerCroweFool.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More