JPMorgan says Tesla is owed $162 million because of a tweet from Elon Musk.
Elon Musk’s Twitter post about taking Tesla private is still haunting him, more than three years later.
On Monday, JPMorgan Chase sued Tesla in federal court, which the bank says the electric automaker owes under the companies’ stock option contracts signed in 2014. At the center of the controversy is a provision in the contract that allows JPMorgan to change its details following any “extraordinary events” at Tesla.
The bank is claiming that an August 7, 2018, tweet – in which Tesla CEO Mr. Musk said he had “funding secure” to take Tesla private at $420 per share – filled the bill because it would allow Tesla The share price of . Tesla leaders disagree.
JPMorgan’s lawsuit states that Tesla sold JPMorgan stock warrants “as part of a larger capital market transaction” in 2014. According to the agreement, if Tesla’s stock was at or above a certain price on the day the option expires seven years later, it must pay JPMorgan a certain amount—the actual share price on that date plus the “strike price” that is determined by both the parties.
The strike price was initially set at only $560 per share. Then came Mr Musk’s tweet about a deal to take Tesla private at $420 a share – a significant premium on the company’s stock price at the time. The tweet initially raised Tesla’s share prices. But they sank when it quickly became clear that no such deal had happened.
Tesla executives scrambled to explain the tweet to shareholders and regulators. Mr. Musk and Tesla later paid $20 million each to settle the Securities and Exchange Commission’s case over the matter, and he agreed to step down from his role as chairman for three years.
Right after the crisis began, JPMorgan wanted to reset the strike price in its contract. Ten days after Mr Musk’s tweet, the bank told Tesla it had reset the price to $424 per share. A week later, the bank raised the price slightly to $484.35 per share.
Tesla did not respond to the changes until early 2019, when its lawyers wrote to JPMorgan claiming that the bank’s strike price adjustment was “unreasonably sharp and opportunistic attempts to take advantage of changes in volatility in Tesla’s stock.” represented.”
The two sides were still at a standstill in 2020 when Tesla’s five-for-one stock split prompted JPMorgan to adjust the strike price for the third time, lowering it to $96.87.
Tesla never accepted any of these changes. Starting in June of this year, Tesla paid JPMorgan only the “undisputed” portion of the agreement on both sides. (Tesla shares traded for more than $600 for most of that month; the stock was valued at $1,013.39 per share at Monday’s close.)
Tasha Pelio, a spokeswoman for the bank, said in an email to The New York Times, “We have provided Tesla with multiple opportunities to meet its contractual obligations, so it is unfortunate that they have forced this issue into litigation. “
Tesla’s attorneys Mr Musk and Ryan McCarthy did not respond to messages seeking comment on Tuesday.
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