JPMorgan Chase &Co. sued Tesla for $162 million, acusing Elon Musk of “flagrantly” breaking the contract related to stock warrants after its share price rose and asked for payments for warrants that expired above their Strike price.
The CEO of Tesla Elon Musk tweeted on 7th August 2018 that he might take Tesla private at $420 per share and also the funding of it is ‘secured’, which led to a significant corporate transaction as claimed by JPMorgan. He said that it had the authority to adjust the strike price and the bank reduced it. But then there was a reversal in the reduction after Aug 24 when Musk abandoned the idea of making the firm private which led to a rise in the share price.
The bank stated in the complaint filed by it on Monday in Manhattan federal court, “Even though JPMorgan’s adjustments were appropriate and contractually required, Tesla has refused to settle at the contractual strike price and pay in full what it owes to JPMorgan.” It added, “Tesla is in flagrant breach of its contractual obligations. As a result, more than $162 million is immediately due and payable to JPMorgan by Tesla.”
In 2014, electric vehicle company Tesla sold warrants to JPMorgan that would pay off if their “strike price” were below Tesla’s share price before the warrants’ expiration in June and July. But as Tesla Stocks rose to more than 10 fold by the time of expiration of contract, so JPMorgan stated that Tesla following its contract had to deliver shares of its stock or cash as its stock prices were well-above the contracted prices.
JPMorgan also stated about the Musk’s complaint about the bank’s adjustments being “an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.”
According to the complaint, “Though JPMorgan’s adjustments were appropriate and contractually required.” It also stated, “Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full.”
The case is JPMorgan Chase Bank v. Tesla Inc. filed in the U.S. District Court of the Southern District of New York (Manhattan).
