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JPMorgan sues Tesla for $162M over warrants dispute, Musk’s tweet

JPMorgan sues Tesla for $162M over warrants dispute, Musk’s tweet

American multinational investment bank JP Morgan Chase & Co. has reportedly sued Elon Musk’s Tesla for $162.2 million. The bank alleges that the EV company ‘flagrantly’ breached a 2014 contract concerning the stock trading option that Tesla had sold to JPM.

The stock options, also known as stock warrants, allow its holders to buy the company’s stock at the strike price on a set date.

JP Morgan has filed a complaint in a Manhattan federal court on dispute over how it had to reprice its Tesla warrants owing to the notorious 2018 ‘Tesla privatization’ tweet made by Elon Musk.

As per the agreement, if Tesla’s share price would be at or above the strike price of $560 on the day the warrants would expire in June and July of 2021, the company would pay JPMorgan the difference between the share price of that day and $560.

So, considering the fact that Tesla’s stock was trading above $600 by June of 2021, JPM stood in a position to make a sizable profit.

However, in 2018, Elon Musk tweeted that he was considering taking Tesla private once the share price would reach $420.

If the buyout price was set at around $420, JPMorgan would not have been able to hit its strike price of $568, thus not making any profits. As such, the bank had to adjust its strike price down to increase its chances of making a profit.

But, just 17 days after making the tweet, Musk scraped his privatization plan, creating significant volatility in Tesla’s share price. The company later went back on its statement and claimed that it had no intensions of going private at all.

Now, the bank is demanding an additional $162 million, arguing that the warrants it signed with Tesla encapsulated standard provisions which allowed it take the strike price down to effectively protect itself against any economic effects involving ‘substantial corporate transactions relating to Tesla’. The bank argues that Musk’s 2018 tweet was just such a ‘substantial’ moment.

JPMorgan, in its complaint, states that Tesla has failed to pay the agreed amount of its stock or cash, adding that Tesla’s failure to do so has resulted into a default.

A spokesperson for JPMorgan has stated that Tesla was given multiple opportunities to fulfill its contractual obligation, but due to non-payment, the bank was forced to file a lawsuit.

Tesla is yet to come out with a public response to JPMorgan’s allegations.

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.