Tesla suing JPMorgan for pushing debt relief plan

Tesla’s CEO, Elon Musk, is reportedly giving JPMorgan another chance to come to an agreement on a debt settlement over an ill-considered tweet.

The Wall Street Journal, citing a Tesla regulatory filing, reported that Tesla had sued JPMorgan, saying the bank had helped push for a settlement that “would effectively forgive Tesla of an additional $160 million in debt owed to the company.”

Musk, JPMorgan and Tesla’s filing all offered little detail about what went down. “Defendants Morgan Stanley & Co., Inc. and JPMorgan have also been communicating with each other regarding possible resolution of the dispute,” Tesla said in its filing. “The parties are fully committed to the elimination of the remaining outstanding debt.”

JPMorgan denied the allegations, calling them “without merit,” and said the company intends to “vigorously defend” itself.

“The article paints a one-sided picture that is uninformed and mischaracterizes the discussions we’ve had,” JPMorgan spokesman Matt Zames said in a statement provided to the Washington Post. “There is no question that we’ve been working diligently over the past several months to come to a positive resolution, and we are not about to walk away from the opportunity. We certainly hope to do so, but we are not going to negotiate in the press.”

Two months ago, Tesla sued JPMorgan, blaming the bank for helping push for a settlement that would essentially forgive Tesla of an additional $160 million in debt owed to the company.

Musk, who tweeted his buyout offer for Tesla in June and then quickly walked back the idea, had claimed in another tweet to Morgan Stanley and other investors that private-equity firm Silver Lake was financing a go-private transaction at $420 a share. But Silver Lake said in a statement in July that it was not involved.

Musk’s May tweet also served as a launching pad for Tesla’s quarterly earnings call, during which he fielded questions about the purchase offer. The CEO, who said he did not plan to reveal any new information about the situation, left it up to several analysts to post responses to the tweets.

At one point, an analyst asked whether the buyer was investing new money into the company. “It seems like that is the impression you’re providing, that Tesla is significantly underfunded right now,” he said.

“No, I’m not,” Musk said.

“Your investor may be contemplating a leveraged buyout of Tesla, and it looks like they’re doing that through debt rather than equity,” he continued. “And so I’m trying to figure out what they’re thinking. It would be helpful for investors who are thinking that way to get a sense as to what is the rationale behind that, and how does that fit with the existing debt that Tesla has outstanding.”

Hours after the questions were posted online, Musk told Tesla’s investors: “Am considering taking Tesla private at $420. Funding secured.” He said he made that announcement with the “great surprise” of high-frequency traders.

Since then, Tesla has said it is confident that Silver Lake will eventually invest $1 billion for its portion of the transaction.

In its lawsuit, Tesla said JPMorgan had played a critical role in pressing for a settlement that would forgive an additional $160 million in debt.

“JPMorgan expressed a unique willingness to substantially reduce the interest rate and provide financing, rather than retain the debt, which would further deprive Tesla of needed funds,” the lawsuit said. “JPMorgan’s view was that the settlement at hand would eliminate all litigation and allow Tesla to return its focus to serving its customers and investors.”

Tesla also said JPMorgan had received “detailed information” about the company’s business and operations.

A JPMorgan spokesman called the lawsuit “without merit.”

“Morgan Stanley & Co., Inc. has consistently acted in the best interests of our shareholders, and will vigorously defend itself against these allegations,” he said.

Tesla’s shares rose $3.13, or 2.1 percent, to $245.90 a share on Thursday.

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