Tags: Chanos | shorts | CGI | Obamacare

Jim Chanos Shorts CGI Group, the Company Overseeing Healthcare.gov

By    |   Thursday, 05 December 2013 10:40 AM

Legendary short seller Jim Chanos, founder of Kynikos Associates, has shorted CGI Group, whose CGI Federal subsidiary is the top contractor for the beleaguered Obamacare website, people knowledgeable about the matter tell Newsweek.

They say CGI counts as one of Chanos' "largest short positions."

CGI, Canada's biggest technology company, has seen its stock soar 50.5 percent over the past year. But Chanos apparently isn't the only one with doubts about the company.

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Obama’s Budget Takes Aim at Retired Americans

A total of 29.9 million CGI shares traded in Toronto, or almost 11 percent of CGI stock traded everywhere, are being shorted, according to FactSet, Newsweek reports. CGI trades on the New York Stock Exchange and Nasdaq too.

Chanos explains his concerns with CGI in a 10-page memo to clients that was obtained by Newsweek.

He cites falling cash flow, declining new business and "accounting conventions" that boosted CGI profits partly by including revenue already counted by Logica, a company CGI bought last year.

CGI's work for Healthcare.gov is a "PR mess," Chanos notes. The negative public relations could "reduce the likelihood of future government contracts" for CGI and perhaps make it "give money back to the government."

To be sure, the Obamacare contract doesn't account for a large portion of CGI's work. Scott Penner, a TD Securities analyst in Toronto, calculates that the Obamacare job totals about C$290 million (about US$271.3 million), less than 3 percent of CGI’s annual sales, Bloomberg reports.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans

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Legendary short seller Jim Chanos, founder of Kynikos Associates, has shorted CGI Group, whose CGI Federal subsidiary is the top contractor for the beleaguered Obamacare website, people knowledgeable about the matter tell Newsweek.
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Thursday, 05 December 2013 10:40 AM
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