JP Morgan sues Tesla for $162m over 'flagrant breach' of contract

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JP Morgan sues Tesla for $162m over 'flagrant breach' of contract

JP Morgan is suing Tesla for $162.2m over what it has called a "flagrant breach" of its contractual obligations in a dispute over warrants, according to court filings on Monday (15 November).

The US bank has alleged that the electric carmaker breached the terms of a contract that the companies signed regarding repricing the warrants.

On top of the $162.2m JP Morgan is seeking from Tesla, it also demands interest, legal fees and expenses.

JP Morgan filed a complaint stating that Tesla sold warrants to the bank in 2014 that would pay off if their "strike prices" were below the carmaker's share price upon expiration of the warrants in June and July this year.

The bank said it had authority to adjust the strike price, which it substantially reduced following Elon Musk's tweet on 7 August 2018 stating he was "considering taking Tesla private" at $420 per share and had "funding secured".

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Some of the strike price reduction was reversed when Musk abandoned the idea less than a month later, but Tesla's share price increased roughly ten-fold by the time the warrants expired.

JP Morgan argued that this required Tesla to contractually deliver shares of its stock or cash. Failure to do so amounted to default, according to the bank.

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The bank stated in the complaint: "Even though JP Morgan's adjustments were appropriate and contractually required, Tesla has refused to settle at the contractual strike price and pay in full what it owes to JP Morgan. Tesla is in flagrant breach of its contractual obligations. As a result, more than $162m is immediately due and payable to JPMorgan by Tesla."

JP Morgan said it had brought forth this action to "enforce" its right to payment. Tesla has been contacted for comment.