Tesla pushed back against JPMorgan Chase & Co.’s lawsuit that claimed CEO Elon Musk’s famous “funding secured” tweet caused volatility and losses by filing a countersuit today. JPMorgan filed the lawsuit in mid-November.
In the November lawsuit, JPMorgan Chase alleged Tesla of breaching a contract in regards to the repricing of warrants. After Musk Tweeted in 2018 that hinted he was considering taking Tesla private, the stock responded with volatility, which caused the stock price to drop, and JPMorgan took a loss. Tesla and JPMorgan had a contract where the automaker was legally obliged to deliver shares or cash if the stock price passed certain levels by a certain time. This is known as a “strike price.”
After Musk sent the “funding secured” tweet, JPMorgan was forced to reprice the warrants due to increased volatility. JPMorgan’s restructuring of strike prices eventually caused the bank to lose over $162 million as Musk’s revised decision to keep the stock public just a couple of weeks later forced the price back up.
The tweet eventually led to a lawsuit with the SEC. Musk and Tesla settled the suit with the SEC months later and required the automaker to “establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications.” Tesla and Musk also paid $20 million each in fines as a part of the settlement’s terms.
Shareholders could either to sell at 420 or hold shares & go private
— Elon Musk (@elonmusk) August 7, 2018
In a new filing Tesla submitted to Manhattan Federal Court on Monday, Tesla says it believes JPMorgan acted in “bad faith and avarice” after it demanded a massive payment of $162.2 million for losses suffered when Musk expressed his desire to take Tesla private at $420 per share in 2018. In its countersuit, Tesla believes JPMorgan’s suit is somewhat unjustified and claims that it could be retaliation for past business deals that have not gone through. “JPMorgan pressed its exorbitant demand as an act of retaliation against Tesla both for it having passed over JPMorgan in major business deals and out of senior JPMorgan executives’ animus toward Mr. Musk,” the automaker said in a suit, according to Reuters.
In regards to the restructuring of warrants, Tesla said JPMorgan “dealt itself a pure windfall” after it benefitted from Tesla’s soaring stock price. In the filing from November, Tesla said JPMorgan’s move was “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock.”
JPMorgan filed the complaint in the Southern District of New York. The case, JPMorgan Chase Bank v. Tesla Inc., 21-cv-09441, is available to read here.
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