JPMorgan sues Tesla for breach of contract

The bank is demanding $ 162.2 million from Elon Musk’s group. In a 2014 deal, Tesla sold him stock warrants, allowing the bank to buy securities at a predetermined strike price.

The US bank JPMorgan has taken legal action against Tesla, claiming the electric vehicle maker 162.2 million dollars (150.5 million francs) for “flagrantly” breaching contractual obligations.

In a complaint filed Monday in federal court in New York, JPMorgan accuses the Elon Musk-led company of failing to pay it stock or cash as required by a contract between the two groups.

In a 2014 deal, Tesla sold stock warrants to JPMorgan, allowing the bank to purchase securities at a predetermined strike price (at $ 560,6388) and before a specified cut-off date (June and July 2021).

If, at the expiration of this contract, Tesla’s stock was higher than the agreed price, the automaker was supposed to pay the difference to the bank. If he was a minor, Tesla did not owe JPMorgan any money.

To guard against a sharp fluctuation in the stock, JPMorgan reserved the right to readjust the strike price in the event of unforeseen events.

However, in August 2018, Elon Musk announced on Twitter that he intended to withdraw Tesla from the Stock Market at a price of $ 420 a share before changing his mind a few weeks later.

Elon Musk pinned

Musk was then immobilized by the US stock market police, the SEC, who forced him to resign as chair of the Tesla board of directors. The company and its boss were also fined $ 20 million.

JPMorgan decided to lower the strike price (to $ 424.66) after Musk’s initial tweet, and then raise it (to $ 484.35) when the executive resigned from Wall Street.

A third adjustment (to $ 96.87) took place in August 2020 when Tesla decided to split its shares 5 to 1.

The bank warned Tesla of the changes, but the manufacturer ignored or challenged them.

“Although JPMorgan’s adjustments were appropriate and required by the contract, Tesla refused to enter into a strike price agreement and pay the amount owed to JPMorgan in full,” the bank wrote in its complaint.

JPMorgan estimates that Tesla owed it nearly 230,000 shares at the expiration of the contract, or $ 162.2 million based on the share price on that date.

Tesla shares closed at $ 1,013.39 Monday at the close of trading. Contacted by AFP, Tesla did not react immediately.

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