Elon Musks Twitter post about the privatization of Tesla still haunted him more than three years later.
On Monday, JPMorgan sued Chase Tesla in federal court, demanding $ 162 million the electric automaker owes under a stock option agreement the companies signed in 2014, according to the bank. At the heart of the dispute is a provision in the contract that allows JPMorgan to adjust its details after “extraordinary events” at Tesla.
The bank claims that a tweet dated Aug. 7, 2018 – in which Tesla CEO Mr Musk said he secured funding “to take Telsa private for $ 420 per share” was factored in, because it significantly lowered Tesla’s share price. Tesla’s leaders disagree.
JPMorgan’s lawsuit said Tesla sold JPMorgan stock warrants in 2014 “as part of a larger capital market transaction.” Under the agreement, if Tesla stock reached or exceeded a certain price on the day the options expired seven years later, a certain amount of money would have to be paid to JPMorgan – the difference between the actual stock price on that day and the so – so-called “payout price” that the two sides had set.
The exercise price was initially set at just over $ 560 per share. Then came Mr Musk’s tweet about a deal to take Tesla private for $ 420 a share – a substantial premium over the company’s share price at the time. The tweet initially caused Tesla’s share prices to skyrocket. But they sank when it quickly became clear that such a deal had not come off.
Tesla executives tried to explain the tweet to shareholders and regulators. Mr. 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.
Shortly after the crisis began, JPMorgan wanted to redefine the exercise price in its contract. Ten days after Mr Musk’s tweet, the bank told Tesla that it had reset the price to $ 424 per share. A week later, the bank raised the price slightly to $ 484.35 per share.
Tesla didn’t respond to the changes until early 2019 when its attorneys wrote to JPMorgan claiming the bank’s strike price adjustments were “inappropriately quick and an opportunistic attempt to capitalize on the volatility of Tesla stock.”
The two sides were still at an impasse in 2020 when Tesla’s five-for-one stock split caused JPMorgan to adjust the exercise price a third time, lowering it to $ 96.87.
Tesla never accepted these changes. As of June this year, Tesla paid JPMorgan only the “undisputed” part of the two sides’ agreement. (Tesla stock traded for more than $ 600 for most of the month; it was worth $ 1,013.39 at the close of trading on Monday.)
“We offered Tesla several options to meet its contractual obligations, so it is unfortunate that they have forced this issue into litigation,” a bank spokeswoman Tasha Pelio said in an email to the New York Times.
Mr. Musk and Ryan McCarthy, a Tesla attorney, did not respond to messages asking for comments on Tuesday.