JPMorgan Sues Tesla For $162 Million Over Expired Stock Warrants

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JPMorgan Chase & Co (NYSE:JPM) has sued Tesla Inc (NASDAQ:TSLA) for $162.2 million, and accused its CEO of breaching a contract related to expired stock warrants the bank alleges were affected by Elon Musk’s “funding secure” tweet from 2018.

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As reported by CNBC, Tesla was supposed to deliver shares, or cash, if its share price went above a contractually set “strike price” by a certain expiration date. However, Musk’s 2018 tweet about taking the firm private for $420 a share prompted JPMorgan to adjust the value of the warrants.

The bank did so again when the billionaire backpedaled on the prospect of privatizing the electric cars manufacturer.

The lawsuit read: “Even though JPMorgan’s adjustments were appropriate and contractually required, Tesla has refused to settle at the contractual strike price and pay in full what it owes to JPMorgan. Tesla is in flagrant breach of its contractual obligations. As a result, more than $162 million is immediately due and payable to JPMorgan by Tesla.”

While JP Morgan argues that it had a contractual right to adjust the value, “Tesla said in a letter that they were ‘unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.’”

The complaint claims that Tesla has failed to deliver 228,775 shares of its common stock, leaving the bank “with an open hedge position equal to that shortfall.”

More Shares Sold

Elon Musk’s Tesla stock sale continued Monday as the CEO shed another $931 million in shares, as reported by CNN. The billionaire exercised options Monday last week for a total price of $5 billion, and continued with the sale of another part worth $687 million, and ended the week by selling another $1.2 billion.

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In the last six trading days, total sales account for $7.8 billion as “He has sold some shares each of those days,” and involved a Twitter poll stunt in which he asked his followers whether he should sell his Tesla shares.

According to the filings with the Securities and Exchange Commission, the latest exercise was “solely to satisfy [Musk's] tax withholding obligations related to the exercise of stock options to purchase 2,107,672 shares as reported herein.”

Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.

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