One "aldt440" -- a mostly-fine pseudonymous commenter (at the other properties), alerted us to this newly-filed federal breach of ISDA contracts suit in Manhattan -- between true heavyweights. Sort of. . . (entirely) unlike. . . Martin and Vyera / Phoenixus AG. Though Martin did stiff Lehman out of over $10 million, right before it imploded in 2008 -- so we post it here (and there, too). . . smile.
Where was I? Oh. Right. In this Telsa complaint, JP Morgan claims Elon owes it over $162 million, in defaulted banker-standard warrant "benefit of the bargain" payments -- under the London based ISDA agreements -- from back in 2014. [To be sure, Tesla now has the money here -- this is not an "inability to pay" case.]
No -- the object lesson here is that when even a (widely then thought of as) superstar entrepreneur has to go to borrow, at the investment bankers' window (because commercial windows are closed to his particularly high risk-level business model) -- especially when running low on actual cash. . . he will surrender more than a pound of flesh, willingly. Which is exactly what Elon did in 2014.
He effectively signed these warrants as part of a larger borrowing deal -- a sweetener, that would have until 2021 to come into the money. [And it would cost him nothing if Tesla flamed out.] But two things happened: (i) the strike price was reached and exceeded, very early on... and (ii) Elon decided he didn't want to pay on the warrant after what he felt was an unfairly fast adjustment, in response to his ill-starred 2018 "going private" tweet.
But standard ISDA language (as I know from my years of running a series of multi-billion dollar ISDA swaps and warrants -- for a Fortune 200 company) absolutely gave JP Morgan (London) the unfettered right to make that adjustment.
At bottom, it was only Elon's own immaturity that cost him $162 million, here -- as he then abandoned the "going private" idea almost as quickly as he tweeted it.
We may discuss whether JP Morgan should have the sole right to be the calculation agent, under those warrants -- but because Elon needed money back then. . . he clearly agreed to it. Most (even larger, seasoned) companies do.
So. . . JP Morgan had the same day right to reset the strike price on the warrants, due to that public announcement of a potential M&A transaction (even by tweet). [It then downward adjusted, when the whole thing was called off, a few weeks later.]
And so -- Tesla will lose here. But it is proof that Musk only honors his word, when it is in his interest to do so.
And that too. . . is telling. He is an. . . infant -- and an increasingly often. . . terrible one.
[He sold a bunch more stock (billions worth, here, and here) yesterday too. Ick.]
Onward, grinning just the same. . . .
नमस्ते
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