- The controversy revolves around a re-evaluation of warrants based on Tesla CEO Elon Musk’s 2018 statements about taking Tesla private.
JPMorgan Chase filed suit against electric vehicle maker Tesla in a dispute over warrants, according to a court filing on Monday. The bank is seeking $162.2 million plus interest, attorneys’ fees and expenses.
JPMorgan alleges that Tesla violated the terms of a contract the companies signed relating to re-pricing warrants.
The complaint said Tesla was to distribute shares, or cash, if the price of its stock moved above a contracted “strike price” by a certain expiration date.
But a controversy arose when JPMorgan adjusted the warrant’s value when Tesla CEO Elon Musk tweeted in August 2018 that he was considering taking the company private for $420 per share, and again when he Tesla rejected the idea of privatization for a few weeks. Later. JPMorgan claims it had a contractual right to make those adjustments, while Tesla said in a letter that they were “unreasonably bullish and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock, According to the filing.
In the 16 months that followed, Tesla stock fell to a three-year low just under $177 per share in June 2019, before shooting up to $420 a share in December of that year. Musk was later charged with securities fraud by the SEC. Tesla and Musk agreed to pay $20 million each to settle the lawsuit.
Tesla shares closed at $1,013.39 on November 15.
“In total, Tesla failed to deliver 228,775 shares of its common stock, giving JPMorgan an open hedge position equivalent to that shortfall,” the complaint said.
Read the full complaint here.