JPMorgan Chase has sued Tesla for $162m, alleging that the automaker failed to make a required payment that was triggered after chief executive Elon Musk’s 2018 announcement that he was considering taking the company private.
In a court filing, JPMorgan said that warrants sold by Tesla had required the bank to adjust its positions after Musk said on Twitter that he had “funding secured” to acquire the company at $420 a share.
When Tesla later announced that it was abandoning the transaction, the value of the warrants changed again and JPMorgan was again obliged to change its position, the bank said in the complaint filed in Manhattan court.
JPMorgan said the terms of the agreement called for it to be paid $162m in cash or stock.
Tesla told JPMorgan that its adjustments were “unreasonably swift and represented an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock”, the complaint said.
The decision by a large US bank to sue a client is rare given its desire to continue working with one of America’s largest companies, but it also underscores how complicated it can be for financial institutions to work with Musk.
“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.”
In a statement, JPMorgan added: “We have provided Tesla multiple opportunities to fulfil its contractual obligations, so it is unfortunate that they have forced this issue into litigation.”
Tesla did not immediately respond to a request for comment.
The lawsuit is just the latest fallout from Musk’s tweet, when he shocked Wall Street with a brief message: “Am considering taking Tesla private at $420. Funding secured.” The tweet was posted after the Financial Times had reported that Saudi Arabia’s sovereign wealth fund had taken a $2bn stake in the electric carmaker.
Following the tweet and reversing his private plan, Musk commenced a battle with the US Securities and Exchanges Commission, which charged him with securities fraud for misleading the market. Musk vehemently rejected the charges at first but ultimately bowed to the SEC and agreed to step down as Tesla’s chair and paid $40m in penalties.