Investment banking company JPMorgan Chase is suing Tesla for over $162 million of unpaid debt. Taking a legal approach to this growing dispute, JPMorgan has filed an official complaint to the Manhattan federal court on Monday.
Banks and businesses working together are a common trend in the market. This partnership usually creates profits for both parties involved. However, this logic might not apply to the JPMorgan and Tesla relationship. Instead, they are in the middle of an extremely expensive financial fallout.
According to JPMorgan, Tesla owes them over $162 million on a 2014 deal. The full details of their transactions and allegations are explained in their written complaint.
JPMorgan Complains About Tesla
JPMorgan said they bought warrants from Tesla in 2014. According to Gizmodo, these warrants give investors like JPMorgan the right to buy Tesla company shares at a predetermined price on a predetermined date. Note that these warrants were set to expire in June and July of 2021.
Based on their contract, one of two things will happen when the warrants expire. If the Tesla stock price was lower than their strike price of $560.64, Tesla could conclude the deal without paying JPMorgan. But if the company stock price was higher than the strike price, Tesla should pay either a certain number of shares or an equivalent sum of cash.
Despite being a straightforward deal, unexpected events that happened in these past few years resulted to some "adjustments" on the agreement.
Tesla Response and Elon Musk Tweets
In August 2018, Elon Musk tweeted about "considering taking Tesla private at $420. Funding [was] secured." The sudden announcement created turmoil among investors, which resulted to a volatile company stock price. Taking the events into consideration, JPMorgan lowered its strike price to $424.66.
Shareholders could either to sell at 420 or hold shares & go private
— Elon Musk (@elonmusk) August 7, 2018
Merely two weeks after the tweet, Tesla made an official announcement about "staying public." The announcement prompted JPMorgan to adjust the strike price again, settling it at $484.35.
According to JPMorgan's written complaint, Tesla didn't offer "any specific objection" during their discussion on the conference calls. The bank also emphasized that in the succeeding weeks, Tesla "did not communicate further." JPMorgan assumed the companies came to an agreement.
However, six months afterward, Tesla lawyers sent JPMorgan a written complaint about the price adjustments being "unreasonably swift." Tesla said it was a market move and "an opportunistic attempt to take advantage of changes in volatility in Tesla's stock."
Since neither party backed down on their stance, this resulted in the lawsuit officially filed earlier this week. JPMorgan wrote that Tesla owes them 228,775 shares worth approximately $162,216,629. Tesla has yet to publicly acknowledge the case.
The situation is still progressing, and investigations are presumably undergoing. Fans and investors should keep an eye out for this case, which could develop new updates in this coming weeks.
