Tesla Sued By JPMorgan Over Refusing To Pay Up $162M In Dispute Over Warrants

JPMorgan Chase & Co JPM has sued Tesla Inc TSLA for $162 million in a breach of contract case related to stock warrants. 

What Happened: The New York-based bank has alleged in a lawsuit filed in Manhattan federal court that the automaker sold warrants to JPMorgan in 2014 which contained certain conditions.

JPMorgan said the warrant transactions required Tesla to either deliver shares of its stock or cash to the latter at the time of the warrant expiry or when the Tesla share price was above a contractual “strike price.”

“The warrants did expire with Tesla’s share price above that strike price. JPMorgan demanded the due shares or cash, but Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full,” as per JPMorgan’s complaint.

See Also: How To Buy Tesla (TSLA) Stock

Why It Matters: The dispute between the two companies came to the fore after JPMorgan made adjustments to the value of the warrants after Tesla CEO Elon Musk tweeted that he was considering taking the EV maker private in 2018 for $420 per share, as per the complaint.

The bank subsequently made adjustments again when Tesla reversed gears on going private after a few weeks of Musk’s announcement. 

“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,” as per the complaint.

In February 2019, Tesla sent a letter to JPMorgan arguing that the bank’s adjustments were “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.”

Tesla’s stock fell to under $177 per share in June 2019 and shot past the $420 per share mark in December of the same year. 

The U.S. Securities and Exchange Commission charged Musk with fraud for making misleading statements related to securing funding to take the company private at a specified purchase price.

Musk reached a settlement with the SEC in which both Musk and Tesla were fined $20 million each and the former agreed to step down as chairman for at least three years.

Musk’s tweets have often spun controversy. In 2018, he landed in hot water after calling a British diver who helped rescue a Thai soccer team a “pedo guy.” Recently, he called Scott Galloway an “insufferable numbskull.”

Price Action: On Monday, Tesla shares closed nearly 1.9% lower at $1,013.39 in the regular session and fell 1.03% in the after-hours session to $1,003.

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