JP Morgan vs. Tesla, the intrahistory of the fight of the titans between Jamie Dimon and Elon Musk

Elon Musk and Jamie Dimon they do not get along.

Musk ha despised JP Morgan Chase & Co. for years, turning to other banks as Tesla and his empire expanded. Over the years, the dialogues between the two companies have often angered one side or the other, according to people close to the matter.

Musk y Dimon han tried to reach an agreement, but, instead, they have collided, according to these sources. Some time ago, JP Morgan decided it’s better off without Tesla, according to people familiar with the matter.

A small part of the discreet quarrel, which pits America’s most valuable automaker against the biggest bank of the country, came to light last week when JP Morgan sued Tesla. In its litigation, JP Morgan stated that Tesla owes you 162 million dollars for a deal the bank helped close in 2014. Typically, bankers seek to avoid public confrontations with large clients and even potential clients, eager for commission and worried that the slightest insult could cost them access.

“We have offered Tesla many opportunities to meet your obligations contractual, so it is unfortunate that they have forced us to turn it into litigation, “JP Morgan stated last week.

“If JP Morgan does not withdraw its claim, I’ll leave you a one-star review on Yelp“Musk declared in response to ‘The Wall Street Journal.’ “This is my last warning!”.

Both CEOs have an impressive presence within their companies and sectors. And both have had public clashes with rivals or cutting words towards critics and regulators, although Dimon has usually ended up showing regret for what he admits to being reckless slipswhile Musk has hardly ever relented.

Tesla has conquered the imagination of the market on the future of electric cars and has become one of the first companies with a valuation of more than a trillion dollars, making her the kind of customer Wall Street fights for.

Tesla Model 3, Hertz’s historic 100,000-unit order. (Reuters)

Investment bankers JP Morgan have not dealt with any offer or transaction from Tesla since 2016, according to public records. When JP Morgan intervened in Tesla’s initial public offering of shares in 2010 and various capital markets deals in subsequent years, it typically lagged behind rivals such as Goldman Sachs and Morgan Stanley.

JP Morgan ha collected about 15 million dollars from Tesla for advisory services and work in the capital markets in the last decade, while Goldman has collected about $ 90 million, according to Dealogic.

Musk has gone to Morgan Stanley, Goldman and Bank of America for the personal loans you have used for endorse your holdings, according to public documents.

Chase Bank, JP Morgan’s consumer bank, is a great auto lenderBut it was reluctant to be an initial sponsor for Tesla and other electric vehicles, according to sources close to the matter. Bankers raised doubts about the long-term value of the electric vehicle batteries.

Tesla will be represented by Alex Spiro, the attorney who successfully defended Musk from a defamation lawsuit.

Later, Chase executives approached Musk looking for a deal to make Chase the main lender for Tesla shoppers at dealerships, according to those sources. The bank had similar agreements with Maserati and Jaguar Land Rover. Musk refused, according to people familiar with the matter.

The bank recently signed a Similar deal with a Tesla rival, electric van maker Rivian Automotive. It has also financed more Tesla cars for its clients lately, according to sources.

Last week’s demand is likely increase tension. Tesla will be represented by Alex Spiro, the attorney who successfully defended Musk from a defamation lawsuit.

At the core of the demand, we find ‘warrants‘(product that grants the right to sell or buy an underlying asset at a strike price) that JP Morgan purchased from Tesla as part of a large set of operations that it helped establish for the company in 2014. Tesla would have to pay JP Morgan, in cash or in shares, if the security was trading above the agreed price when the warrants expire in 2021.

Photo: Rivian R1T in New York. (Reuters / Brendan McDermid)

The contract, according to JP Morgan, allowed the bank such a strike price if Tesla announced that it was studying a sale or other type of operation, since that would affect the value of the warrants.

In 2018, Musk tweeted that he had secured funds to privatize Tesla at $ 420 the action. JP Morgan lowered the strike price and warned Tesla, according to its lawsuit. When it became clear that there was no deal, JP Morgan raised the strike price again, but not to the original price. Tesla objected, according to the lawsuit, telling JP Morgan that their price adjustments were “unreasonably fast” and “opportunistic”.

Tesla also told JP Morgan that he was the only bank that had made such an adjustment, according to the complaint. JP Morgan stated that the other banks “could have refused to adjust their warrants for business reasons that they had nothing to do with the contractual terms or the reasonableness of JP Morgan’s adjustments ”.

When the contracts started expire in June 2021, the share price had skyrocketed and was above the original and adjusted price. JP Morgan requested the payment and Tesla paid JP Morgan based on the original exercise price. Refused to pay the additional amount that would have required adjustments, according to the bank.

* Content licensed from ‘The Wall Street Journal’.

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JP Morgan vs. Tesla, the intrahistory of the fight of the titans between Jamie Dimon and Elon Musk