JP Morgan Chase is suing Tesla for $162 million (£121 million) over a tweet from boss Elon Musk in 2018 that he could take the electric car maker as a private individual. The bank accused Tesla of “apparently” breaching the deal, which allegedly led to the payment to JP Morgan.
Musk’s infamous tweet that funds to take Tesla off the New York Stock Exchange had caused stock price volatility. He later reversed the move and was fined by the US Treasury. The JP Morgan lawsuit filed in Manhattan federal court says the company signed an agreement in 2014 that the bank to buy Tesla stock at a specific price and date.
As part of the deal, Tesla sold so-called warrants to JP Morgan, allowing the bank to buy shares if the exercise price is below Tesla’s share price when the contracts expire in June and July 2021.
“We have given Tesla many opportunities to fulfill its contractual obligations, so, unfortunately, they are forcing a lawsuit on this matter,” a JP Morgan spokesperson said in a statement.
JP Morgan said the warrants contain standard terms that allow for price adjustments to protect both parties from the economic impact of a “significant company deal with Tesla,” such as the announcement that the company will be privatized.
Mr. Musk tweeted on August 7, 2018, that he could take Tesla’s private price of $420 per share and have “safe funding.” Seventeen days later, he rejected the plan. Tesla’s stock price rose roughly tenfold at the time of the warrant this year, and JP Morgan says this requires Tesla to transfer its shares or money under its contract.
Failure to do so, says JP Morgan, is a mistake. Tesla has not commented publicly on the bank’s case. But the company said in 2019, when news of the dispute emerged, that JP Morgan was “opportunistic” to capitalize on the stock price volatility.
Mr. Musk is an avid and often controversial Twitter user and now has 64 million followers. This month alone, the billionaire caused a stir when he asked his followers in a Twitter poll if he should sell his 10% stake to Tesla. That voice, yes. A 2018 tweet about Tesla’s removal from the exchange led to accusations by the potent US regulator, the Securities and Exchange Commission, misleading the market.
Mr. Musk vehemently denied the allegations but eventually agreed to a deal, which resulted in his resignation as the automaker’s chairman. He and Tesla were fined $40 million.