According to Bloomberg News, JP Morgan Chase & Co has filed a lawsuit against Tesla Inc seeking a payment of $162 million which is related to a collection of stock warrant transactions that were adversely affected when Elon Musk had attempted to take the carmaker private 3 years ago in a shot attempt.
The warrants were bought about the largest bank in the United States from Tesla in the year 2014 to aid the automaker to do away with the risk that the stocks might be diluted by convertible note issuance and also to make specific federal income tax deductions as per a complaint filed Monday in the federal court of Manhattan. When the warrants expired, Tesla will have to pay JP Morgan a share of the payment or cash if the stocks trade more than a certain spike cost.
Bloomberg News also reports that JP Morgan has claimed that it enjoyed a discretion to adjust the strike price based on other factors, volatility of the Tesla stocks being one of them. Two modifications were made by the bank in August 2018. One was after Elon Musk tweeted that he had funds to take Tesla private, and the second one was when the chief executive officer abandoned the efforts several weeks after.
Now the warrants have expired, and JP Morgan has claimed that Tesla has “shorted the bank” what was due. Although adjustments of JP Morgan were appropriate and required contractually, Tesla is not willing to settle the contractual strike price and make the payment in full, which JP Morgan is supposed to receive.
Tesla wrote to JP Morgan in February 2019 to argue adjustments the bank had made 6 months earlier were “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla stock”, as per the complaint.
But JP Morgan has claimed that Tesla did not back up the assertions or make any specific challenges related to calculations. Tesla did not respond to a request that was made to comment on the lawsuit.
This disputed episode brings up Elon Musk’s one of the most controversial incidents. The US Securities and Exchange Commission has filed a lawsuit against the CEO and Tesla in September 2018, accusing Musk of having committed securities fraud and that the company does not have adequate control over his activities on social media.
Without giving into wrongdoings, Tesla and Musk each agreed to shell out $20 million in a settlement. This incident caused the CEO to give up his role as board chairman for three years, and Tesla has agreed to seek a lawyer’s help to pre-approve material information that Elon Musk intends to communicate to the investors.
The controls have, however, not been able to stop Musk from raising the controversy on Twitter. At the beginning of this month, he conducted a poll wherein he wanted to know whether he must sell 10% of his Tesla stake. He has since then offloaded $7.8 billion of the shares of the company giving rise to a situation of stock sell-off.
