JP Morgan Chase, an Investment banking company, has sued Tesla for $162m (£121m) over tweets made in 2018 by its chief executive, Elon Musk, that he had the funding to take Tesla off the New York stock market.
Gatekeepers News reports that Musk, on 7 August 2018, tweeted that he might take Tesla private at $420 per share and had “funding secured”. The tweet sparked volatility in the share price even though he abandoned the move 17 days later and was fined $40m by the US financial regulator.
The investment bank accused Tesla of “flagrantly” breaching a deal it claims should have triggered payments to JP Morgan.
JP Morgan’s suit, filed in a Manhattan federal court, says the companies had an agreement signed in 2014 that allowed the bank to buy Tesla shares at a set price and date.
Under the deal, Tesla sold so-called warrants to JP Morgan allowing the bank to purchase shares if the “strike” price was below Tesla’s share price when the warrants expired in June and July 2021.
“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 JP Morgan said in a statement.
JP Morgan said the warrants contained standard provisions that allowed it to adjust its price to protect both parties against the economic effects of “significant corporate transactions involving Tesla,” such as an announcement the company was going private.
Tesla’s share price rose approximately 10-fold by the time the warrants expired this year, and JP Morgan said this required Tesla under its contract to hand over shares of its stock or cash.
JP Morgan said failure to do so amounted to a default.
Tesla is yet to comment publicly on the bank’s lawsuit, but in 2019, said JP Morgan was being “opportunistic” to take advantage of the share price volatility when news of the dispute emerged.
Musk recently ran a Twitter poll on whether he should sell 10 percent of his shares in Tesla. The poll garnered over 3.5 million votes and about 57.9 percent voted in favour of Musk selling a 10 percent chunk of his holdings.
