According to court filings on Monday, JPMorgan Chase filed a lawsuit against Tesla for $162.2 million, accusing Musk’s electric vehicle company of “flagrantly” breaching a contract related to stock warrants after its share price rocketed.
JPMorgan claims that Tesla breached the terms of a contract that was signed between the companies about repricing the warrants. It was allegedly agreed that if Tesla’s share price rose above a “strike price” by a specific expiration date, then it was supposed to deliver either shares or cash.
However, a dispute between the banking giant and EV maker arose when JPMorgan adjusted the value of the warrants following a 2018 tweet from Musk in which he said he was considering taking Tesla private for $420 a share, and again when he revoked the idea a few weeks later.
JPMorgan argues it had a contractual right to make these adjustments, but Tesla said in a letter that they were “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.”
Over the past 16 months, Tesla stock reached a three-year low, hitting approximately $177 per share in June 2019, then soaring past $420 per share in December 2019.
Soon after this time, Musk was charged with securities fraud by the SEC. The Tesla CEO and his company agreed to pay $20 million each to settle the suit.
JPMorgan claims that “Tesla failed to deliver 228,775 shares of its common stock, leaving JPMorgan with an open hedge position equal to that shortfall.”