JPMorgan has filed a lawsuit against Tesla following its accusation that the EV owed it $162 million due to a contract breach a few years ago. The case was linked to the previous agreement on a stock warrant.
The decision boiled down to two parties after CEO Elon Musk tweeted about “secured funding of private shares for $420 apiece in 2018. After 17 days, the billionaire decided to ditch the idea.
JPMorgan Sued Tesla Due to Stock Warrant Agreement
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The JPMorgan Chase & Co. World headquarters are pictured on April 17, 2019 in New York City.
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Reuters first reported that the lawsuit involving the major bank started in 2014. At that time, Tesla relied on a convertible debt to continue the funding for the Gigafactory.
A stock warrant refers to a contractual agreement involving an investor and an issuer. It grants a company to purchase some shares within a particular period. According to the report, JPMorgan’s warrants from Tesla were slated to end in June and July 2021.
Both parties acknowledged the contract, which tackles $560.6388 as the “strike price.” If in case the expiration for the warrants occurred and Tesla’s stock price was lower than the strike price,” no one would owe anything.
On the other hand, if the stock price were ahead of the strike price, the contract would allow Tesla to give the stock equivalent to the price difference.
JPMorgan said that all legal protections had been set at the time. In 2018, Musk posted a tweet about securing private funding for Tesla at $420.
Following the Twitter drama that erupted, Musk wrote another tweet that pointed out the confirmed investor support. In short, the automaker has confirmed that a “firm offer” was on its way at that time.
Musk Abandons Taking Tesla Private
Just when JPMorgan discovered the truth about the adjustment in warrants’ strike price, it released calculations that ended up at a $484.35 settlement, The Verge reported.
Before that, the New York-based bank witnessed the volatile trend of Tesla’s stock price. It was included in the lawsuit that there was a scheduled conference call to take place on August 24, 2018, but Tesla decided to ditch it at the last minute.
Following this accusation, the electric vehicle manufacturer held a protest against JPMorgan. The company said there shouldn’t be a necessary adjustment because it has immediately abandoned its original plan to go private.
After that, Tesla’s lawyers informed JPMorgan through a letter about the “opportunistic attempt” of the bank over the firm’s stock prices. In 2019, the latter rejected the car maker’s allegations against it.
In 2020, JPMorgan imposed another adjustment in August 2020, which led to the stock price hitting $96.87. While Tesla agreed to settle its fair shares to the bank, it did not cover the whole payment. With that, the contract was terminated.
According to the financial institution, Tesla should return 228,775 shares during the deal’s termination. Because the former did not settle the remainder of the shares, JPMorgan needs to cover the hedged bet by purchasing a similar amount of shares from the open market.
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Previous Tesla Lawsuits
Tech Times reported in 2017 that Musk’s company became controversial when a female employee sued it over her claims about gender discrimination. According to the complainant, all her female colleagues were denied the promotion.
Earlier this year, we also reported that another Tesla employee was involved in stealing a private code. The automaker sued the software engineer who allegedly stole the files from the Warp Drive system.
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Written by Joseph Henry
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