Elon Musk’s Twitter post about taking Tesla privately still haunts him more than three years later.
On Monday, JPMorgan sued Chase Tesla in a federal court claiming $ 162 million, which the bank says the electric car maker owes it under a stock option contract the companies signed in 2014. The crux of the dispute is a provision in the contract that allows JPMorgan to tweak its details after any “extraordinary events” at Tesla.
The bank claims in a tweet on August 7, 2018 – in which Mr Musk, Tesla’s CEO, said he had “secured funding” to take Telsa privately to $ 420 per tonne. share – fits the bill because it lowered Tesla’s share price significantly. . Tesla’s executives disagree.
JPMorgan’s lawsuit states that Tesla sold JPMorgan stock warrants in 2014 “as part of a larger capital market transaction.” Under the agreement, if Tesla’s share was at or above a certain price on the day the options expired seven years later, it would have to pay JPMorgan a certain amount – the difference between the actual share price on that date and the so-called “strike price” that they two pages had stipulated.
The strike price was originally set at just over $ 560 per. shares. Then came Mr Musk’s tweet of an agreement to take Tesla privately to $ 420 per share – a significant premium over the company’s share price at the time. The tweet initially sent Tesla’s stock prices up. But they sank when it quickly became clear that no such agreement had been reached.
Tesla executives tried to explain the tweet to shareholders and regulators. Musk and Tesla later paid $ 20 million each to settle a Securities and Exchange Commission case on the matter, and he agreed to step down from his role as chairman for three years.
Right after the crisis began, JPMorgan wanted to reset the strike price in its contract. Ten days after Mr Musk’s tweet, the bank told Tesla that it had reset the price to $ 424 per tonne. shares. One week later, the bank raised the price slightly to $ 484.35 per share. shares.
Tesla did not respond to the changes until early 2019, when its lawyers wrote to JPMorgan, claiming that the bank’s strike price adjustments had been “unreasonably rapid and represented an opportunistic attempt to take advantage of changes in Tesla’s stock volatility.”
The two sides were still in a stalemate in 2020, when Tesla’s five-for-one share split prompted JPMorgan to adjust the strike price a third time, lowering it to $ 96.87.
Tesla never accepted any of these changes. As of June this year, Tesla paid JPMorgan only the “undisputed” part of the two parties’ agreement. (Tesla shares traded at more than $ 600 for most of that month; the stock was worth $ 1,013.39 per share at Monday’s close.)
“We have given Tesla more opportunities to meet its contractual obligations, so it is unfortunate that they have forced this issue into a lawsuit,” a spokeswoman for the bank, Tasha Pelio, said in an email to The New York Times.
Mr. Musk and Ryan McCarthy, a Tesla attorney, did not respond to messages seeking comment Tuesday.