First Elon Musk started tweeting at 4:50 a.m. on March 21 to tell the world that he was “considering taking Tesla private at $420. Funding secured.”
That’s his original tweet
But here’s where this became a great drama, one that some wondered was no longer relevant. Musk rewound the clock back a day to clarify that “funding secured” was just a side note, and a “spontaneous idea,” when he first told his 77,000 Twitter followers of the possibility of a Tesla private equity transaction on his first full day back on the job.
After a week of distraction, and without moving forward on a deal, it’s just turned into another way for Musk to boggle his mind.
In a lawsuit filed in federal court in New York, JPMorgan Chase is claiming that Musk owes the bank $162 million for providing financing for the Tesla acquisition of SolarCity. JPMorgan claims that Musk’s revelation of the deal on his first day back from a two-week leave of absence constituted unauthorized disclosure of confidential information.
“On information and belief, Musk’s disclosure of Tesla’s negotiations for financing SolarCity on his first day back from an eight-week medical leave of absence from the company caused, and was intended to cause, certain investors to sell their Tesla shares on the opening day of trading and, ultimately, to vote against the $2.8 billion Special Purpose Acquisition Company (‘SPAC’) financing in favor of the $2.6 billion SPAC financing,” the complaint says.
Tesla has denied JPMorgan’s allegations and says the lawsuit “was brought after the board and the company decided not to go forward with a privatization transaction” in the end. Tesla also said that it reserved the right to take legal action against JPMorgan Chase over the matter, and intends to do so.
But is Tesla really owed that money? According to the complaint, Musk actually was trying to raise capital for the two companies with an intention to keep his interests aligned with the interests of the shareholders, even as he appeared to be consolidating power to secure the transaction to take Tesla private.
The complaint says that before March 21, Musk and company executives were telling investors that solar energy was one of the most important areas of investment for Tesla, and that Tesla was actively trying to reduce the cost of its products.
Musk said in a call with investors two days later that it would take some time to get to his goal of eliminating solar energy companies from the marketplace, but that Tesla could already see dramatic cost reductions because of its manufacturing platform, such as its new Gigafactory, the complaint said.
If the lawsuit is any indication, this is just the beginning for Musk, who continues to figure out a way to make news at a great pace, whether it’s a Twitter rant or a plunge into short selling. Musk did not immediately return a request for comment.
The complaint contends that JPMorgan was working with Tesla in its attempt to get financing to acquire SolarCity, even as it was trying to arrange a special financing vehicle to facilitate the transaction.
According to the complaint, on March 21, SolarCity announced that it was placing a “put” option on SolarCity’s shares for a potential $450 million in financing. The put option gives SolarCity the option to put the shares into a newly created subsidiary at a predetermined price.
With the put option now in place, as JPMorgan continues to investigate the transactions relating to the acquisition of SolarCity and Tesla, it obtained a copy of Musk’s March 21 Twitter post and was suspicious of a sudden and unexpected expansion of his Twitter feed, the complaint says.
Musk’s letter to the board included details of the possible merger of Tesla and SolarCity.
A week later, when Tesla announced that a $2.9 billion secondary offering was being undertaken to help facilitate the SolarCity acquisition, JPMorgan apparently sensed that there was more than meets the eye.
“Accordingly, the evidence shows that, at least in the hour leading up to the market open, Elon Musk was both personally seeking to provide Tesla with another source of capital via the SolarCity Put Option and simultaneously was seeking to negate shareholder dissent by manipulating the market ahead of the SolarCity placement,” the complaint said.
This article was originally published on The Washington Post.