American financial services company JPMorgan Chase has sued Elon Musk’s Tesla for $162.2 million, citing a breach of contract following a soar in the prices of Tesla shares.
The complaint was submitted in a Manhattan federal court on Monday, and stated that Tesla in 2014 sold some warrants to JPMorgan.
These warrants would eventually pay off if the company’s strike price (set price at which a contract can be bought or sold when it is exercised) ended up below Tesla’s share price upon the expiration of the warrants in 2021.
JPMorgan stated that it had the authority to adjust the strike price, and therefore significantly reduced the price after Tesla CEO Elon Musk’s tweet on August 7, 2018.
The tweet stated that Musk might take Tesla private at only $420 per share, and had already acquired funding. JPMorgan however reversed part of the reduction after Elon Musk dropped the idea about 17 days later.
Tesla’s share price rose about tenfold at the export of the warrants, and JP Morgan said that Tesla was required under contract to deliver either shares or cash.
The bank stated that Tesla’s failure to do either resulted in a breach of contract by the automobile giant.
Tesla however did not immediately respond to any requests for comment after market hours.
Stated in the complaint was the allegation that Tesla sold the warrants to manage stock dilution, and to reduce the company’s federal income taxes.
JPMorgan also said that the contract gave proper clearance to adjust the terms of the warrants, after important corporate transactions that involved Tesla.
In February 2019, the automobile company stated that the bank’s adjustments to the warrants were merely an opportunistic attempt to take advantage of the changes in the volatility of Tesla stock.
As a result of Elon Musk’s tweets, the US Securities and Exchange Commission charged him and slapped massive $20 million fines on both Musk and Tesla.