Tesla boss Elon Musk and JP Morgan CEO Jamie Dimon don’t even try to hide their mutual dislike. Against all (unwritten) rules of the financial sector, the New York bank last week decided to take the richest man in the world, and particularly his carmaker, to court over a seven-year-old matter. . As reported by the Wall Street Journal, in fact, in 2014 Jp Morgan had completed an operation on behalf of Tesla, which should now pay 162 million dollars into the bank’s coffers.
To be more precise, the company would have refused to pay the extra that the bank imposed on the initial price. JP Morgan had in fact purchased warrants from Tesla as part of a package that included a broader range of shares. The contract stipulated that, if the shares were to be traded at a higher price than the one agreed once the warrants expired – last June -, Musk’s company would have to pay, in cash or through shares.
“He has had several occasions to fulfill his contractual obligations”, they say from Jp Morgan, regretting that the matter must be concluded in court. “If she doesn’t withdraw the complaint, I’ll give her a star on Yelp,” Musk retorted with a hint of hilarity, referring to the platform that collects customer reviews on businesses. “And my final warning!”
Irony aside, the disagreement between the two is evident. What the South African businessman complains about are the price adjustments imposed by the bank, which took place in “unreasonably fast” times and moved by an opportunist spirit. For Tesla, no other lender works like JP Morgan. And this is not a compliment.
However, the contract stipulated that the bank could revise the price when the car company decided to announce a sale or other transaction that could affect the value of the warrants. The episode on which the bank’s ongoing change is based, therefore, is authentic to a 2018 tweet from Musk announcing that he would remove Tesla from the stock exchange at 420 dollars per share, a clear reference to 4:20, number ” sacred ”of marijuana users.
Thus, Jp Morgan lowered the price of the warrants and then raised it when he realized that the operation would not be successful, without however bringing it back to the levels decided four years earlier. “Other banks may have refused to change the warrants for economic reasons that have nothing to do with the contractual terms or the reasonableness of JP Morgan’s adjustments,” was the institution’s response to Musk’s allegations. By June 2021, however, the share price had risen above its initial price.
Tesla, therefore, refuses to pay more than what he had established in 2014 and, to win in court, he relied on the well-known New York lawyer, Alexander Benjamin Spiro, formerly Musk’s defender two years ago, when they cleared him of the accusation of defamation by Vernon Unswort.
Over the years, attempts have been made to try to heal the situation between Tesla and Jp Morgan but, due to resistance from both sides, there has never been a pacification. Indeed, Tesla has always tried to turn to other banks and Jp Morgan, in the end, has decided to completely close the relationship. Investors in the most important of the Big Four have been trying to avoid any kind of collaboration with Tesla for five years. Since taking over the company’s IPO in 2010, the bank has always seen itself outnumbered by various Morgan Stanley, Goldman Sachs or Bank of America.
The feeling, therefore, that there was no good feeling was already present at the time. Suffice it to say that in the last decade Tesla has turned to JP Morgan for services worth 15 million dollars, against the 90 million dollars of fees guaranteed to Goldman Sachs. Even when some trusted advisors of Musk suggested turning to the bank, given its partnership with other leading companies like Maserati and Jaguar Land Rover, the businessman turned up his nose preferring not to listen to them.
Not that JP Morgan behaved differently. The question of whether or not to invest heavily in the electric car market was great, given the mistrust of the long-term duration of the sector’s value. Still, he would not fail to support Rivian Automotive, one of Tesla’s main rivals.
The diatribe has certainly become very compelling for those who tell it, less so for those directly involved. It is absolutely not customary for bankers to expose themselves in such a clear way towards a company, for fear of the consequences that may derive from it. Evidently for Jamie Dimon this is an exception to the rule. It doesn’t matter if Musk drops the infamous starlet on Yelp.
