Diverting Tesla stock from loan could cost JPMorgan $162 million

Money wasn’t the only thing at stake Friday in a hearing to resolve a loan dispute between Tesla and JPMorgan. Musk’s first hours at the helm of the beleaguered electric automaker may have cost…

Diverting Tesla stock from loan could cost JPMorgan $162 million

Money wasn’t the only thing at stake Friday in a hearing to resolve a loan dispute between Tesla and JPMorgan.

Musk’s first hours at the helm of the beleaguered electric automaker may have cost JPMorgan — which lent $1.25 billion to Tesla in October 2017 — more than $162 million, according to documents made public Friday.

JPMorgan’s interest in the number reflects a provision in Tesla’s credit line that allows for either the companies to agree to a settlement or Tesla to add “no value” to its investments in Tesla.

JPMorgan attorneys tried to argue that Tesla should not be permitted to pull from its loan funds any of the money raised from selling its shares to the public.

According to a staff memo, filed with the Securities and Exchange Commission and first reported by the New York Times, “Tesla‚Äôs operation did not support the use of the proceeds.”

Meredith Kitchen, a managing director in JPMorgan’s wealth management and private banking division, wrote that $163.2 million of the funds raised could be improperly diverted.

The documents offer a glimpse of the escalating price of Elon Musk’s reputation after his erratic behavior took center stage at the company’s annual shareholder meeting two weeks ago. Musk appeared in a video dousing a journalist with water and calling the media “morons.”

Tesla (TSLA) and JPMorgan (JPM) did not immediately respond to a request for comment.

In a brief statement released following the hearing, Tesla called the charge “a new charge which will no longer apply to future actions or contingencies.”

The incident underscores a challenge for Musk: his ability to keep Tesla and the company’s investors on his side. The former tech CEO has until June 11 to reach a settlement with the SEC or face a lengthy legal battle.

The SEC is investigating Tesla for allegedly making misleading statements about its Model 3 production problems in October, according to reports. The agency’s attorneys are pushing for a deal to prevent Musk from destroying the company.

Musk’s prospects of being able to keep his own shareholders on side are not good, however. On the shareholder’s meeting two weeks ago, he accused the company’s board of conspiring against him and implying that shareholders might want a change in leadership.

Short seller Doug Kass has previously called for Musk to step down as Tesla’s CEO as a condition of a settlement. “Elon is completely conflicted with respect to Tesla,” Kass told CNNMoney. “I think there’s a high probability of this deal falling apart and that Tesla’s stock will inevitably implode to the low single digits before the deal closes.”

Musk was previously ousted from Twitter’s board of directors in May 2018 after the company threatened to sue him for violating its terms of service. Earlier that month, he called journalists critical of Tesla’s Model 3 production a “lynch mob.”

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