Tesla Countersues JP Morgan Over Windfall Gains

Tesla Inc. (NASDAQ: TSLA) has countersued JP Morgan Chase & Co. (JPM) over windfall gains earned in a bond contract, according to Reuters. The original lawsuit was against a 2018 tweet by CEO Elon Musk that Tesla may become a private entity, which was withdrawn later, resulting in severe stock price volatility.

Shares of the world’s largest electronic vehicle (EV) maker plunged 9.8% during the intraday trading session amid an overall market selloff on the hawkish economic environment. Furthermore, markets are also seeing a selloff in risk assets and digital currencies this week, with Bitcoin plunging to its record lows.`

Tesla’s Countersuit

In an ongoing lawsuit, JPM has demanded that Tesla pay $162.2 million over a disputed bond contract. Tesla calls the claim a show of “bad faith and avarice”, since JPM had on its own accord changed the terms of the warrants, which JPM had received on Tesla’s convertible bonds in 2014.

Tesla claims that after changing the terms of the warrants, JPM earned pure windfall gains after receiving a “multibillion-dollar payout” due to its increased stock price.

These warrants give the holder a right to buy the company stock at a pre-determined stock price and date. JPM has accused Tesla of defaulting since it has neither handed over the shares nor cash on the expiry of the warrants in June and July 2021.

Since the two giants have been at loggerheads over the disputed contract, neither has carried out many business transactions with the other.

Tesla’s infamous tweet of 2018 had also led to a U.S. Securities and Exchange Commission civil lawsuit, whereby, both Tesla and Musk ended up paying $20 million each in fines, coupled with Tesla revoking Musk’s chairmanship.

Company Comments

In the countersuit, Tesla said, “JPMorgan pressed its exorbitant demand as an act of retaliation against Tesla both for it having passed over JPMorgan in major business deals and out of senior JPMorgan executives’ animus toward Mr. Musk.”

Meanwhile, JPM spokesman Brian Marchiony said, “There is no merit to their claim. This comes down to fulfilling contractual obligations.”

Analysts’ Take

Ahead of Tesla’s earnings, Wedbush analyst Daniel Ives reiterated a Buy rating on the stock and assigned a price target of $1,400, which implies 50.5% upside potential to current levels.

Despite the ongoing global chip shortages, Ives acknowledges that Tesla has already surpassed the delivery estimates for Q4. Looking ahead, the analyst said, “Now this week the focus will be around Tesla’s delivery unit commentary for 2022, chip shortage issues, Giga Austin/Berlin launch dates, and the overall growth/profitability trajectory for 2022 and beyond.”

Overall, the stock has a Moderate Buy consensus rating based on 15 Buys, 8 Holds, and 6 Sells. At the time of writing, the average Tesla price target was $1,074.69, which implies 15.6% upside potential to current levels.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 75% Bullish on TSLA, marginally ahead compared to a sector average of 71%.

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