JPMorgan Sues Tesla for $162 Million

17 November 2021

    JPMorgan has sued Tesla for $162.2 million, accusing the electric car company of breaching a contract agreed on in 2014 relating to warrants Tesla sold to the bank.


    Warrants give the holder the right to buy a company's stock at a set "strike" price and date. The suit centers on a dispute over how JPMorgan  re-priced its Tesla warrants as a result of Musk's 2018 tweet that he was considering taking the company private.


    According to the complaint, Tesla in 2014 sold warrants to JPMorgan that would pay off if their "strike" price was below Tesla's share price when the warrants expired in June and July 2021.


    JPMorgan said the warrants contained provisions that allowed it to adjust their price to protect both parties against the economic effects of "significant corporate transactions involving Tesla," such as an announcement the company was going private.


    Musk's 2018 tweet that he might take Tesla private at $420 per share, and his subsequent announcement that he was abandoning the plan, created significant volatility in the share price.


    JPMorgan adjusted the strike price "to maintain the same fair market value" as prior to the tweets both times. Tesla's share price rose approximately 10x by the time the warrants expired this year, and JPMorgan said this required Tesla under its contract to hand over shares of its stock or cash. The bank said Tesla's failure to do that amounted to a default.


    "We have provided Tesla multiple opportunities to fulfil its contractual obligations, so it is unfortunate that they have forced this issue into litigation”, a spokesperson for JPMorgan commented, "Though JPMorgan's adjustments were appropriate and contractually required, Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full”.

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