New York- Investment Bank JPMorgan has sued Tesla Inc for $162.2 million for ‘’deliberately’’ breaching the 2014 contract. The Bank accuses Elon Musk’s electric car company, Tesla, of breaching contracts related to stock trading options that Tesla sold to the Bank. According to the Warrant, the holder has the right to buy a company’s stock at a set ‘’strike’’ price and date. The suit, filed in a Manhattan Federal Court, centres on a dispute between the bank and Tesla Company. According to the suit, Elon Musk’s 2018 tweet about Carmaker Company private impacted the Warrants. JPMorgan re-priced its Tesla Warrants following the tweet. However, Tesla denied its acceptance calling it an opportunistic approach to earn profit.
JPMorgan and Tesla Business
Though, JPMorgan says they had a little business with the electric car company over the past seven years. It is unusual for a major Wall Street bank to sue its high-profile client Elon Musk. JPMorgan spokesperson said in a statement, ‘’ we have provided Tesla multiple opportunities to fulfill its contractual obligations, so, unfortunately, they have forced this issue into litigation.’’ However, Tesla did not respond to any requests for comment.
According to the lawsuit, Tesla in 2014 sold warrants to JPMorgan that would pay off if their ‘’strike’’ price was below Tesla’s share price. Only when the warrants expire in June and July 2021. Furthermore, JPMorgan said that the warrants contained standard provisions. Those provisions allow the bank to adjust its price to protect both parties against the economic effects of ‘’significant corporate transactions involving Tesla,’’.
Elon Musk Tweet
Meanwhile, on August 7, 2018, Elon Musk tweeted that he might take the company private at $420 per share. They had ‘’ funding secured.’’ Also, after 17 days he abandon the plan. That creates significant volatility in the share price, according to the Bank. Similarly, on both occasions, the bank adjusted the strike price ‘’ to maintain the same fair market value’’ as before the tweets.
As the warrant expires, Tesla’s share price rose approximately 10-fold. Under the contract, JPMorgan requires Tesla to hand over the shares of its stock or cash. However, Tesla fail to do that amounted to a default.
The complaint said, ‘’ Though JPMorgan’s adjustments were appropriate and contractually required. Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full.’’ However, Tesla in February 2019 said that the bank’s adjustments were ‘’ an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.’’