Electric vehicle maker Tesla is being sued by JP Morgan Chase & Co for $162.2 million. The financial institution is accusing Elon Musk's company of breaching a contract the two companies agreed to in 2014, relating to warrants Tesla sold to the bank. Warrants give the holder the right to buy a company's stock at a set “strike” price and date, Reuters reported.
If the value of Tesla's price went above the 'strike price', the company was supposed to deliver cash or shares by certain expiration date, the lawsuit filed in a Manhattan court reads. The dispute centres over how JP Morgan re-priced its Tesla warrants after Musk, in 2018 tweeted that he was considering taking the carmaker private. In 2014, Tesla sold warrants to JPMorgan that would pay off if their "strike" price was below Tesla's share price when the warrants expired in June and July 2021.
It is unusual for a major Wall Street bank to sue such a high-profile client. The bank has done relatively little business with the carmaker for over seven years. “We have provided Tesla multiple opportunities to fulfil its contractual obligations, so it is unfortunate that they have forced this issue into litigation,” a spokesperson for JPMorgan said.
Tesla's founder Elon Musk's August 7, 2018 tweet that he might take Tesla a private inc. at $420 per share and had “funding secured,” and his announcement 17 days later that he was abandoning the plan, affected the share price considerably, the bank said. At the time, the bank had adjusted the strike price “to maintain the same fair market value” as before the tweets. Tesla's share price rose approximately 10-fold by the time the warrants expired this year, and Tesla ignored its contractual obligation to pay the bank.