JPMorgan’s Jamie Dimon and Tesla’s Elon Musk Feud Behind the Scenes

Messrs. Musk and Dimon have tried to patch issues up however clashed as a substitute, the folks mentioned. JPMorgan determined a while in the past that it’s higher off with out Tesla, in line with folks acquainted with the matter.

A small a part of the quiet feud, which pits America’s Most worthy automobile maker in opposition to its largest financial institution, spilled into the open final week when JPMorgan sued Tesla. In its lawsuit, JPMorgan mentioned Tesla owes it $162 million from a commerce the financial institution helped organize in 2014. Usually, bankers search to keep away from public fights with massive shoppers and even potential shoppers, anxious about profitable charges and fearful the slightest insult may value them entry.

“We’ve offered Tesla a number of alternatives to meet its contractual obligations, so it’s unlucky that they’ve pressured this difficulty into litigation,” JPMorgan mentioned final week.

“If JPM doesn’t withdraw their lawsuit, I’ll give them a one star evaluate on Yelp,” Mr. Musk mentioned in response to The Wall Avenue Journal. “That is my ultimate warning!”

Each chief executives are commanding presences inside their corporations and industries. And each have had public fights with rivals or sharp phrases for critics and regulators, although Mr. Dimon has usually wound up expressing remorse over what he admits are uncareful slips whereas Mr. Musk has hardly ever backed down.

Tesla has captured the market’s creativeness about the way forward for electrical vehicles and change into one of many first corporations valued at greater than $1 trillion, making it the form of shopper Wall Avenue fights over.

JPMorgan’s funding bankers haven’t labored on any Tesla providing or transaction since 2016, in line with public data. When JPMorgan labored on Tesla’s 2010 preliminary public providing of inventory and a number of other capital-markets transactions within the following years, it was normally ranked behind rivals similar to

Goldman Sachs Group Inc.

GS -0.58%

and Morgan Stanley.

JPMorgan has been paid about $15 million by Tesla for recommendation and capital-markets work up to now decade, whereas Goldman has made about $90 million, in line with Dealogic.

Mr. Musk has used Morgan Stanley, Goldman and Financial institution of America Corp. for the private loans he has pledged his stockholdings in opposition to, in line with public filings.

JPMorgan’s Chase client financial institution is an enormous auto lender, however it was hesitant to be an early backer of Teslas and different electrical automobiles, folks acquainted with the matter mentioned. Bankers raised considerations in regards to the long-term worth of electric-vehicle batteries.

Later, Chase executives approached Mr. Musk about an settlement to make Chase the first lender to Tesla patrons at dealerships, the folks mentioned. The financial institution has comparable offers with Maserati and Jaguar Land Rover. Mr. Musk mentioned no, the folks mentioned.

The financial institution lately signed the same pact with a Tesla rival, the electric-truck maker

Rivian Automotive Inc.

RIVN 3.12%

It has additionally been financing extra Teslas lately for its prospects, the folks mentioned.

Final week’s lawsuit is prone to enhance the strain. Tesla shall be represented by

Alex Spiro,

the lawyer who efficiently defended Mr. Musk in a defamation lawsuit.

On the coronary heart of the lawsuit are warrants that JPMorgan purchased from Tesla as half of a giant set of trades it helped arrange for the corporate in 2014. Tesla must pay JPMorgan, in money or inventory, if the inventory was buying and selling above the agreed-upon worth when the warrants expired in 2021.

The contract, JPMorgan mentioned, allowed JPMorgan to vary that strike worth if Tesla introduced it was exploring a sale or different transactions, as a result of that will have an effect on the worth of the warrants.

In 2018, Mr. Musk tweeted that he had secured funding to take Tesla non-public at $420 a share. JPMorgan lowered the strike worth and alerted Tesla, in line with its lawsuit. When it grew to become obvious there was no deal, JPMorgan moved the strike worth greater once more, however not all the best way again to the unique worth.

Tesla objected, in line with the lawsuit, telling JPMorgan that its worth changes have been “unreasonably swift” and “opportunistic.”

Tesla additionally instructed JPMorgan it was the one financial institution making such an adjustment, in line with the lawsuit. JPMorgan mentioned the opposite banks “could have declined to regulate their warrants for enterprise causes having nothing to do with the contractual phrases or the reasonableness of JPMorgan’s changes.”

By the point the contracts began expiring in June 2021, the inventory worth had soared and was above each the unique and the adjusted costs. JPMorgan requested fee and Tesla paid JPMorgan primarily based on the unique strike worth. It refused to pay the additional quantity the changes would have required, the financial institution mentioned.

—Liz Hoffman contributed to this text.

Write to David Benoit at david.benoit@wsj.com