Jim Chanos called Tesla Motors' proposed merger with SolarCity "crazy" and "the height of folly" while outlining his short positions in the stocks on Tuesday.



The short-seller from Kynikos Associates estimated the combined company would burn through $1 billion per quarter and "constantly need access to capital markets." He described SolarCity's business model as "just plain uneconomic."

Shares of Tesla were more than 1 percent lower in intraday trade, while SolarCity shares were more than 4 percent lower.

Contacted by CNBC, SolarCity declined to comment beyond what it has previously said about the Tesla deal.

Chanos described his case against the electric automaker and solar power company at the Delivering Alpha conference sponsored by CNBC and Institutional Investor.



In particular, he highlighted a paragraph from an August Tesla filing that showed the company's reluctance to give SolarCity financing while the merger is pending:

"Representatives of Skadden requested that Tesla consider providing SolarCity with short-term financing during the pendency of the merger...Evercore met with representatives of Lazard conveying that Tesla, based on prior discussion of the Tesla board, would likely accept a customary go-shop provision and reduced termination fee as proposed by the Special Committee, but that SolarCity should obtain financing from a third party during the pendency of a merger."

—CNBC's Christine Wang contributed to this report.

