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Highlights
- Tesla-JPMorgan warrant trade dispute took a new turn after Elon Musk threatened the bank to give one-star rating on Yelp in a WSJ interview.
- The bank said it owes US$162 million from Tesla in a warrant trade case dating back to 2014.
- In 2018, exercising its rights, JPMorgan had lowered the warrants’ strike price after Tesla CEO tweeted about a funding proposal at US$420 per share.
The dispute over a warrant trade between JPMorgan and Tesla took a new turn this week after Elon Musk threatened to lower the rating for Yelp if it doesn’t withdraw a lawsuit against it.
Musk told The Wall Street Journal that if JPMorgan doesn't withdraw the lawsuit, he would give the bank a one-star rating on Yelp. “This is my final warning!" he told the paper.
In a separate Twitter post, he also said that "serious allegations deserve serious responses."
The dispute dates back to 2014 when JPMorgan received Tesla warrants for helping the EV maker. The warrants gave the bank the right to purchase Tesla shares at a pre-agreed strike price.
They became more valuable given Tesla's valuation now jumped to US$1 trillion.
In addition, the agreement provided the bank with the mandate to readjust the strike price if the EV maker plans a stock sale in the future.
However, in 2018, exercising its rights, JPMorgan had lowered the warrants’ strike price after Tesla CEO tweeted about a funding proposal at US$420 per share. But when the plan didn’t materialize, the bank raised back the price but not to the original strike price, according to the lawsuit.
After the warrants expired in June this year, Tesla paid the bank based on the original strike price instead of the bank’s adjusted strike price. Hence, the bank claims Tesla owes an additional US$162 million based on its adjusted strike price.
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Pic Source: Pixabay
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JPMorgan’s strike price hike "opportunistic"
Tesla on its part alleged that the price changes were "unreasonably swift" and "opportunistic," according to WSJ. It further claimed in a lawsuit that it was the only bank to make such an adjustment. In response, JPMorgan said that other banks might have declined to adjust their prices due to business reasons and not for contractual reasons.
Although the bank had helped the EV company to go public in 2010, their ties haven’t been smooth. JPMorgan was initially hesitant to finance Tesla EVs due to concerns over the batteries long-term value, WSJ reported.
Also, according to Dealogic, Tesla paid JPMorgan a paltry US$15 million for market advice over the past decade, way below the US$90 million it paid to Goldman Sachs. Finally, Musk’s comments in media and on his Twitter handle have surely upped the ante even as their court battle continues.
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Versha Jain - Financial Journalist648 PostsVersha is a post-graduate in finance and has vast experience in the retail banking and education sectors. She also holds a keen interest in development work. At Kalkine, she writes on stock markets, companies, equities, and IPOs, etc....
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Sanjeeb Baruah - Financial Journalist368 PostsSanjeeb is a senior journalist who has been in the media for nearly two decades. He wrote on various topics, from politics, international relations, business to wildlife. At Kalkine, he writes on stock markets, companies, equities, and IPOs, etc....
