Tesla says JPMorgan brought the losses on itself while trying to take advantage of the stock’s volatility.
Tesla CEO Elon Musk’s infamous “$420. Funding secured.” tweet may haunt him forever. As you may remember, the outspoken CEO said back in 2018 that he was planning to take Tesla private at $420, and noted that funding was secured.
Needless to say, the tweet got Musk in some hot water with the SEC at the time. However, Tesla is still dealing with it since JPMorgan Chase & Co. ended up losing a lot of money after Musk sent out the tweet. In fact, according to Teslarati, the investment bank claims Tesla breached its contract related to the “repricing of warrants.”
Essentially, Musk’s tweet caused TSLA stock to become more volatile, and JPMorgan wasn’t expecting him to make such a major announcement on social media. Since its plans didn’t consider the potential for Musk to tweet out a market-moving message, it wasn’t prepared for the aftermath. The firm sued Tesla back in November 2021 to the tune of $162.2 million.
JPMorgan asserts that Musk’s tweet caused the investment bank to have to reprice warrants and adjust strike prices. Later, Musk changed his mind about taking Tesla private, which resulted in the stock’s recovery, and JPMorgan’s multi-million dollar loss.
For those of us who aren’t apprised of all the details related to investing, the situation is a bit complex. However, in short, Tesla’s share price dropped, then recovered, which caused JPMorgan to lose money. The firm says Tesla had entered into an earlier contract stating that it would have to provide shares or cash if the stock price hit specific levels over a period of time.
When Musk learned about JPMorgan’s lawsuit, he poked fun at the firm. In fact, he went so far as to tell The Wall Street Journal he was going to give the investment bank a 1-Star review on Yelp.
Tesla has now filed a countersuit against JPMorgan with the Manhattan Federal Court. Per Teslarati, the automaker says the firm acted in “bad faith and avarice” when it said Tesla must pay $162 million. Tesla also points out that JPMorgan may have filed the suit to get back at the automaker for other potential deals that have not panned out.
Tesla believes that JPMorgan brought the situation on itself. It was working to take advantage of Tesla’s rising stock price, as well as its volatility. While Musk’s controversial tweet likely contributed to the volatility at the time, anything can happen at any time.
Whether or not it’s individuals or companies investing in stock, both buying it to hold it over the long term or day-trading and shorting it to take advantage of volatility, investors win and lose all the time. So, can a bad investment decision be blamed on external forces? It really depends on the circumstances, and we won’t know for some time exactly how this all plays out.
It will be interesting to see how this all pans out. A major decision on lawsuits like this could impact investors well into the future. Will Tesla win since it doesn’t have control over JPMorgan’s investing decisions, and the bank is ultimately responsible for its own decisions? Or, will JPMorgan prevail since Musk has already been punished for the tweet, and if he never published it in the first place, the firm may not have seen such a loss? Start a conversation in the comment section below.
Keyword: Tesla Files Countersuit Against JPMorgan's $162 Million Lawsuit