JPMorgan Settles Tesla Lawsuit Over Stock Warrants for $162 Million

JPMorgan and Tesla have settled their lawsuit. The lawsuit was filed by JPMorgan in November 2021 and alleged Tesla breached a stock warrant contract and was seeking $162.2 million in damages.

Both sides announced the settlement in a Manhattan court filing on Friday and agreed to dismiss all claims against each other. No details of the settlement were disclosed and neither company has commented to the press.

The dispute stems from a 2014 agreement where Tesla sold stock warrants to JPMorgan. The dispute escalated after Elon Musk’s 2018 tweet about taking Tesla private at $420 per share which caused huge volatility in the stock.

The Role of Musk’s 2018 Tweet in the Dispute

The 2018 tweet where Musk said he had “funding secured” to take Tesla private caused market chaos. Tesla’s stock price went wild after the tweet and Musk’s subsequent announcement that the going private plan was dead. JPMorgan argued that these events required an adjustment to the strike price of the stock warrants which was its contractual obligation.

JPMorgan said Tesla didn’t make the payments required after the stock’s 10x increase. In its counterclaim filed in January 2023, Tesla accused JPMorgan of trying to get an unfair “windfall” by repricing the warrants.

Warrants give the holder the right to buy a company’s stock at a set “strike price”. In this case JPMorgan argued the adjustments were needed to keep the warrants at fair value during the stock price volatility caused by the tweet.

Settlement’s Broader Implications

The settlement ends a lawsuit that raised questions about contractual obligations in volatile markets and executive communication on financial instruments. No details of the settlement were disclosed but the case shows how much Musk’s tweets affect Tesla’s financials.

• Key Timeline:

  • 2014: Tesla sells warrants to JPMorgan.

  • August 2018: Musk tweets about taking Tesla private.

  • November 2021: JPMorgan sues Tesla for $162.2 million.

  • January 2023: Tesla countersues JPMorgan.

• Market Impact: The case underscores how stock volatility tied to executive actions can complicate financial contracts.

• Compliance Spotlight: Musk’s 2018 settlement with the SEC mandated pre-approval for specific tweets, a stipulation that remains relevant for corporate governance.

This settlement not only resolves a high-stakes legal battle but also serves as a cautionary tale about the intersection of executive behavior, market dynamics, and contractual agreements.