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JPMorgan Sues Tesla For $162 Million In Warrant Dispute Tied To Elon Musk’s Tweets

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JPMorgan Chase sued Tesla for $162 million Monday, accusing the carmaker of breaching a contract over stock warrants after CEO Elon Musk tweeted about taking the company private in 2018, the latest fallout from the social media post that saw the billionaire charged with securities fraud. 

Key Facts

JPMorgan alleges Tesla “flagrantly” violated the terms of a contract relating to stock warrants, according to a lawsuit filed in the Southern District of New York Monday.

According to court documents, Tesla sold JPMorgan stock warrants in 2014 and agreed to deliver shares or cash if its stock price was above a set price by the time they expire, with provisions for the bank to adjust the price in light of major corporate transactions like mergers or taking the company private.  

JPMorgan adjusted the value of the warrants when Musk tweeted he was considering taking Tesla private and had “funding secured,” according to the filing, adjusting again when Musk walked back the idea weeks later.

When the warrants expired this year, the share price had risen tremendously and were “well above” the strike price, JPMorgan said, though Tesla “refused to settle at the contractual strike price.”

Tesla claimed the bank was “unreasonably swift” and “opportunistic” in its adjustments to “take advantage of changes in volatility in Tesla’s stock,” according to the court documents.

JPMorgan said it is seeking the more than $162 million due, alongside expenses and legal fees. 

Key Background

Musk’s now infamous tweet has caused chaos for the billionaire and for Tesla. He was sued by the Securities and Exchange Commission and charged with securities fraud “for a series of false and misleading tweets.” The regulator held that Musk had not even discussed specific terms of a deal to take Tesla private, let alone secured funding. Musk and Tesla both agreed to pay $20 million to settle the suit. Since 2018, Musk’s social media presence has continued to attract regulatory attention and in 2019, the SEC clarified that Tesla needs to approve any tweets about the company’s finances or other information considered material to investors and has repeatedly warned the company to rein in his tweeting. 

Further Reading

Elon Musk sued by SEC over ‘funding secured’ tweet (Verge)

Elon Musk says he might take Tesla private for $420 per share (Verge)

SEC Reportedly Warned Tesla To Stop Letting Elon Musk Tweet Without Permission (Forbes)