Jim Chanos Squares Off Against Carl Icahn, Cheniere Energy, Inc. (LNG) With Latest Short

Cheniere Energy, Inc. (NYSEMKT:LNG) is set to start exporting through its Sabine Pass LNG terminal in mid-December, becoming the first U.S.-based natural gas exporter, while the construction of another export terminal in Texas is well under way, with the company having borrowed some $20 billion for the building of the two terminals. Natural gas is cooled at an LNG plant until it takes liquid form, thus becoming easier to transport overseas, and is then regasified at the destination for normal distribution via pipelines. Roughly 80% of the company’s production is already tied-up in long-term supply deals, with the remaining share to be distributed to consumers as the demand arises. The company has estimated EBITDA of $2.2 billion per year from these contracts. In a recent interview with the Financial Times, Charif Souki, the Chief Executive Officer of Cheniere, stated his belief that demand for natural gas has more room to grow and sees the gas market eventually taking the form of a spot market, similar to the oil business.

Cheniere Energy, Inc. (NYSEMKT:LNG) is bleeding money and has not turned a profit for more than 20 years, but that did not stop Carl Icahn from taking an 8.18% stake in the company in August. His reputation immediately paid off, with Cheniere Energy’s management allowing him to appoint two board members just days later. It’s not just Icahn who sees upside potential in Cheniere Energy, Inc. (NYSEMKT:LNG), as billionaire Seth Klarman is also heavily invested in the company. His fund, Baupost Group, reported ownership of 15.3 million shares as of June 30, up by 12% during the second quarter. Andreas Halvorsen has, on the other hand, has chosen to limit his exposure to Cheniere, dumping 27% of his stake during the second quarter. His fund, Viking Global, now holds 11.3 million shares, the third-largest position among the hedge funds that we track.

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