Tesla Owes the Bank $ 162 Million: JPMorgan

JPMorgan has sued Tesla, alleging that the electric car company owes the bank $ 162 million in connection with a 2014 stock guarantee deal. The dispute centers on the adjustments the companies made to the deal following the tweet from Tesla CEO Elon Musk's 2018 "Insured [f] unding" and the ensuing consequences.

The lawsuit was filed Monday night in the Southern District of New York. Tesla did not immediately respond to a request for comment and disbanded its American press team. According to the lawsuit, which was first reported by Reuters, JPMorgan bought a series of warrants from Tesla in 2014, when the company was still trying to finance the construction of the original Gigafactory.

Stock warrants give the buyer (JPMorgan, in this case) the right to buy shares in a company (Tesla) at a fixed price within a certain time window. The warrants that JPMorgan purchased from Tesla in 2014 were due to expire in June and July 2021. Initially, the companies agreed to a "strike price" of $ 560,6388. If the warranties expired and Tesla's stock price was lower than the strike price, neither company would owe the other anything. But if Tesla's stock price was above the strike price at expiration, JPMorgan says that Musk's company was basically supposed to deliver shares equal to the difference between those prices.

Being a massive and complicated financial transaction, JPMorgan made sure all kinds of legal protections were in place. One was a hedge against big announcements related to mergers or acquisitions that could affect Tesla's stock price. If something like this happened, the bank and the automaker were able to agree on a new strike price for the guarantees.

This brings us to the tweet. Musk tweeted on August 7, 2018, that he was "considering taking Tesla privately for $ 420. Secure funding." Later that day, Tesla's CFO, his chief communications officer, and his chief attorney wrote an email attributed to Musk that was posted on the Tesla blog explaining his announcement. Musk also tweeted that "[i]nvestor support is confirmed. The only reason why this is not certain is that it's contingent on a shareholder vote." Tesla's head of investor relations also told reporters that there was a "firm offer."

Yet basically none of that was true, as everyone found out after the Securities and Exchange Commission sued Musk and Tesla over the ad. Musk had a cursory conversation with the Saudi Arabia Public Investment Fund, but that was it. However, before that truth came to light, JPMorgan saw the resulting volatility in Tesla's share price and decided to modify the exercise price of its warrants. He lowered the price to $ 424.66 and notified Tesla. Tesla accepted a conference call scheduled for Aug. 24, but withdrew at the last minute, according to the lawsuit.

That same day, Tesla and Musk announced that they were abandoning the attempt to privatize Tesla. So JPMorgan decided once again to adjust the exercise price of the warrants. He made new calculations based on the response to Tesla and Musk's decision to turn 180 degrees and set an exercise price of $ 484.35.

Tags: JPMorgan, Tesla, Elon Musk