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Legal Suit Of $162 Mln Filed By JP Morgan Against Tesla Linked To Warrants And Musk’s Tweets

Legal Suit Of $162 Mln Filed By JP Morgan Against Tesla Linked To Warrants And Musk’s Tweets
Accusations of the United States based electric car company Tesla of "flagrantly" breaching a contract linked to stock warrants following a recent surge in the company’s stocks were leveled in a lawsuit by JPMorgan Chase & Co in which the lender demanded compensation of $162.2 million.
Warrants were sold to JPMorgan by the Elon Musk’s company in 2014 according to which it pay off if their "strike price" were below Tesla's share price after the expiration of the warrants in June and July 202, according to the lender’s complaint filed in Manhattan federal court.
While claiming that it had the authority to adjust the strike price, JPMorgan said the strike price was substantially reduced by the bank following a Tweet by Musk on August 7, 2018, in which he had said that he could take Tesla private at $420 per share and had "funding secured," and reversed some of the reduction when Musk abandoned the idea 17 days later.
But the tweet resulted in a sudden rise in the electric vehicle marker’s share price which surged by about 10 times at the time of the expiry of the warrants. JP Morgan said that this necessitated Tesla, according to the contract, for the car maker to deliver shares of its stock or cash.
The failure of Tesla to honor that amounted to a default, the bank said,
"Though JPMorgan's adjustments were appropriate and contractually required," the complaint said, "Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full."
There were mop comments on the issue available from tesla.
The complaint filed by JP Morgan claimed that the warrants were initially sold by Tesla to bring down the risk of a potential stock dilution linked to a separate convertible bond sale as well as to bring down the amount of federal income taxes it was due to pay.
After "significant corporate transactions involving Tesla", it had been contractually entitled to adjust the warrants' terms, JPMorgan said.
In 2-019, Tesla, which is currently the most valuable auto company in the world, had argued that the bank's adjustments were "an opportunistic attempt to take advantage of changes in volatility in Tesla's stock," but JPMorgan said that the underlying calculations had not been challenged by the car maker.
The tweets made by Musk had prompted the US Securities and Exchange Commission to file civil charges against Musk and his company along with imposing $20 million fines against both Tesla and Musk.

Christopher J. Mitchell

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