Chanos Shorts Firm Behind Obamacare Rollout Glitches

Dec 6 2013 | 12:16pm ET

Legendary short seller Jim Chanos has Canada's CGI Group, the firm behind the glitch-plagued rollout of the Affordable Care Act Exchanges, squarely in his sights.

In a 10-page memo obtained by Reuters, the Kynikos Associates founder gave his reasons for counting the stock (parent company of CGI Federal, the main contractor behind the Healthcare.gov rollout) among his “largest short positions.” Among them, concern that the PR mess surrounding the rollout “could reduce the likelihood of future government contracts” for CGI and his belief that the company's “growing through acquisitions hides deteriorating fundamentals.”

Chanos also expressed concern about CGI's cashflows, new business bookings and “accounting conventions” that have improved the firm's earnings at least partly by recognizing revenues already counted by Logica, a company CGI acquired in 2012.

The Kynikos founder is also worried that U.S. federal government spending accounts for roughly 14% of CGIs total revenue and that spending may be curtailed by the coming round of budget sequester.

According to the data firm Markit, about 50.8 million shares of CGI's 277.47 million outstanding shares were being shorted as of Tuesday.

CGI Group’s U.S.-listed stock dropped as much as 5.9% after Newsweek first reported Chanos' short early Wednesday.


In Depth

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.