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JPMorgan Suing Tesla for $162m After Musk Tweets Soured Share Deal

Smart Finance

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JPMorgan (JPM) is suing Tesla (TSLA) for $162 million after Elon Musk's 2018 tweet about taking Tesla private .

JPM has accused Tesla of "flagrantly" breaching the deal.

In 2018 Elon Musk tweeted "Am considering taking Tesla private at $420. Funding secured" with a subsequent tweet stating "Shareholders could either to sell at 420 or hold shares & go private". This tweet received 14.6k retweets, 7000 Quote tweets and 84.8k likes. These tweets obviously gained a lot of attention from investors and news outlets, this sparked volatility in the share price.

After abandoning the move to take Tesla private, Elon Musk was fined by the US financial regulator. Elon settled the lawsuit in a court-approved deal. Though he did not admit any wrong doing he chose to step down as chairman. Both Elon and Tesla paid $20m each to settle the case. A sum worth now pittance to one of the richest men alive.


JP Morgan's suit was filed in a Manhattan federal court. The companies had an agreement signed in 2014 that allowed the bank to buy Tesla shares at a set price and date.

Under the deal, Tesla sold warrants to JP Morgan allowing the bank to purchase shares if the "strike" price was bellow Tesla's share price when the warrants expired in June & July 2021.


The options agreement between JPM and Tesla was if Tesla's share price was at or above the strike price of $540 on the day the warrants expired in June and July 2021, it would owe JPMorgan the difference between the share price on that date and $560.

"The bank argues that Musk’s tweet on 7 August 2018 that he might take Tesla private at $420 a share – at that point the shares were worth $341.99 – was just such a significant moment. With a buyout price set at $420, JPMorgan could not reach its strike price of $568 and therefore would not make any money. Accordingly, JPMorgan adjusted the strike price downwards, therefore increasing the chance of profit."


"We have provided Tesla multiple opportunities to fulfil its contractual obligations, so it is unfortunate that they have forced this issue into litigation" - Spokesperson for JPMorgan.
 

J.Stalling

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Jul 27, 2021
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Elon is funny with his tweets but i do wonder if he was more of a normal CEO which tweeted less rubbish, i wonder how that would have effected the company.