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| Tesla owes $162 million to JPMorgan Chase |
Investment bank JP Morgan Chase sued Tesla, claiming the electric car maker owes the bank $162 million under a 2014 stock guarantee agreement.
After CEO Elon Musk tweeted "Guaranteed Money and Impact" in 2018, a rift between the two sides led the company to make changes to the deal.
According to the lawsuit reported by Reuters, the investment bank bought several guarantees from Tesla in 2014 while the company was still working on financing the construction of the original Giga plant.
In the financial sector, a security is a type of security that enables the holder to buy the basic share of the issuing company at a fixed price (the so-called exercise price) until the expiration date.
The warrants give the buyer (in this case JPMorgan Chase) the right to buy Tesla shares at a certain price for a certain period of time.
The warranty JP Morgan Chase acquired from Tesla in 2014 expires in June and July of 2021.
The company initially accepted an execution price of $560.6388. If the warrants expire and the auto company's stock price is less than the strike price, neither company will owe the other.
But if the company's stock price is above the exit price, as JP Morgan Chase said, the automaker must essentially provide stock that matches those spreads.
As a large and complex financial transaction, JP Morgan Chase ensures that there are many legal safeguards in place. The first is to cover any major mergers or acquisitions likely to affect the stock price. In this case, the bank and the car manufacturer can agree on a price to meet the new warranty.
JPMorgan Chase sues Tesla for $162 million
On August 7, 2018, Musk said on Twitter that he plans to turn Tesla into a private company with a share price of $420, and that the money is guaranteed.
Later that day, the company's chief financial officer, communications director, and attorney general wrote an email attributed to Musk and posted it on the company's blog explaining the announcement.
Musk also tweeted: Investor support assured. The only reason this is not confirmed is because it depends on shareholder votes. The company's director of investor relations told some media that there was a consistent offer.
None of this is true, as everyone found out after the US Securities and Exchange Commission sued Musk and the company for publicity.
Musk gave a brief interview to the Saudi Public Investment Fund. But nothing serious.
JPMorgan Chase previously witnessed the resulting price swings and decided to adjust the strike price for its guarantees. He lowered the price to $424.66 and notified the company. Tesla accepted the meeting originally scheduled for August 24. But according to the lawsuit, he surrendered at the last minute.
On the same day, Musk announced that he was giving up on privatizing the company. As a result, JPMorgan Chase decided once again to adjust the strike price of its guarantee. He calculated based on Musk's decision and eventually set the strike price at $484.35.
JPMorgan sues Tesla for $162 million
JPMorgan Chase wrote in its lawsuit that this time Tesla protested that it should not make adjustments because it was too quick to abandon its plans.
The bank provided the company with an account and made several calls for clarification, saying the company had no specific objections to the statements. Then, JPMorgan Chase said Tesla had suspended talks with the bank within six months.
The company's lawyers wrote to JPMorgan Chase in February 2019, saying the bank's adjustment rate was insufficient and an opportunistic attempt to profit from fluctuations in stock prices.
JPMorgan Chase responded by rejecting all of the company's allegations. But neither side came forward over the next two years. The bank adjusted it back to $96.87 in August 2020 to calculate a Tesla stock split. He said the company did not respond to that either.
Until the expiration date this year. The company's stock price is very high and the guarantees provided by JPMorgan Chase are very valuable.
When the bank contacted the company to withdraw the funds, it renewed
its objections to the amendments. The company has settled some shares
with JPMorgan. But the settlement refused entirely. As a result, the
Bank resorted to an early termination clause.
JPMorgan says Tesla
still owed 228,775 shares when it closed the deal. And that these
shares are worth $1,622,16628, based on the share price at the time.