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JPMorgan sues Tesla for $162m over unpaid warrants

That expired above their strike price, which had been muddied by Elon Musk’s tweet in 2018 threatening to take the company private.
Image: Nina Riggio/Bloomberg

JPMorgan Chase & Co. sued Tesla seeking a $162 million payment for warrants that expired above their strike price, which had been muddied by Elon Musk’s tweet in 2018 threatening to take the company private.

JPMorgan claims the August 7, 2018 tweet amounted to a significant corporate transaction that allowed it to adjust the strike price, and the bank reduced it to maintain the same fair market value as before the announcement. Tesla abandoned the going-private deal on August 24 of that year, and JPMorgan again adjusted the strike price to reflect the increase in the share price.

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“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,” the bank said in a complaint filed Monday in Manhattan federal court. “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.”

Tesla wrote JPMorgan on February 13, 2019, complaining the adjustments made were “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock,” the bank said in the breach of contract complaint.

Tesla didn’t respond to a request for comment on the lawsuit.

JPMorgan said as part of a series of warrant transactions in 2014, Tesla agreed to pay the bank in stock or cash if, when the warrants expired in June and July, Tesla’s share price was above the contracted price. If Tesla’s stock price on the expiration date was less than the strike price, JPMorgan wouldn’t get anything. The shares were “well above” the original and adjusted strike prices upon their expiration, the bank said.

The case is JPMorgan Chase Bank v. Tesla Inc., 21-cv-09441, U.S. District Court, Southern District of New York (Manhattan).

© 2021 Bloomberg

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