Hedge fund manager Jim Chanos warned KKR might pull out of its planned acquisition of Nashville, Tenn.-based Envision Health if Envision and Mednax stocks fall, Reuters reports.
Here's what you should know:
1. Mr. Chanos' hedge fund notably sells stocks short, meaning he borrows shares and sells them immediately, hoping to buy them back at a discounted price. The tactic is only successful when the stock he's shorting loses money.
2. Mr. Chanos believes KKR will have to borrow money "to pay interest from the get-go."
3. Because of that, Mr. Chanos firm is "staying short. We don't think it's a negligible chance that the deal might break as KKR realizes what it's buying."
4. He referred to Envision as a ticking time bomb and suggested all physician practice management companies "earn nothing."