JPMorgan sues Tesla for $162 million after Musk tweets soured warrant deal


JPMorgan Chase & Co has sued Tesla Inc for $162.2 million, accusing Elon Musk‘s electrical automobile firm of “flagrantly” breaching a contract the 2 company giants agreed in 2014 referring to warrants Tesla bought to the financial institution.

Warrants give the holder the proper to purchase an organization’s inventory at a set “strike” value and date. The swimsuit, filed in a Manhattan federal courtroom, facilities on a dispute over how JPMorgan re-priced its Tesla warrants because of Musk’s infamous 2018 tweet that he was contemplating taking the carmaker non-public.

It’s uncommon for a serious Wall Street financial institution to sue such a high-profile consumer, though JPMorgan has executed comparatively little enterprise with the electrical carmaker over the previous seven years, in keeping with Tesla’s filings and Refinitiv information.

“We’ve supplied Tesla a number of alternatives to satisfy its contractual obligations, so it’s unlucky that they’ve pressured this subject into litigation,” a spokesperson for JPMorgan mentioned in a press release.

Tesla didn’t reply to requests for remark.

In accordance with the criticism, Tesla in 2014 bought warrants to JPMorgan that might repay if their “strike” value was beneath Tesla’s share value when the warrants expired in June and July 2021.

JPMorgan mentioned the warrants contained commonplace provisions that allowed it to regulate their value to guard each events towards the financial results of “important company transactions involving Tesla,” corresponding to an announcement the corporate was going non-public.

Musk’s Aug. 7, 2018 tweet that he would possibly take Tesla non-public at $420 per share and had “funding secured,” and his subsequent announcement 17 days later that he was abandoning the plan, created important volatility within the share value, the financial institution mentioned. On each events, JPMorgan adjusted the strike value “to take care of the identical honest market worth” as previous to the tweets.

Tesla’s share value rose roughly 10-fold by the point the warrants expired this yr, and JPMorgan mentioned this required Tesla below its contract handy over shares of its inventory or money. The financial institution mentioned Tesla’s failure to do this amounted to a default.

“Although JPMorgan’s changes have been applicable and contractually required,” the criticism mentioned, “Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full,” the financial institution mentioned.

Tesla in February 2019 complained that the financial institution’s changes have been “an opportunistic try to reap the benefits of adjustments in volatility in Tesla’s inventory,” however didn’t problem the underlying calculations, JPMorgan mentioned.

Musk’s tweets resulted within the U.S. Securities and Change Fee bringing civil prices and $20 million fines towards each him and Tesla.

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