JPMorgan Chase & Co. and Tesla Inc. have agreed to dismiss their respective lawsuits concerning a 2014 stock warrant agreement, effectively ending a protracted legal battle. The dispute centered on adjustments JPMorgan made to the warrants’ strike price following a 2018 tweet by Tesla CEO Elon Musk, in which he stated he was considering taking Tesla private at $420 per share and had “funding secured.” This announcement caused significant volatility in Tesla’s stock price, prompting JPMorgan to reprice the warrants to maintain their fair market value.
In November 2021, JPMorgan filed a lawsuit against Tesla in the U.S. District Court for the Southern District of New York, seeking $162.2 million for alleged breach of contract. The bank argued that Musk’s tweet and the subsequent stock price fluctuations necessitated adjustments to the warrants’ strike price, as stipulated in their agreement. Tesla countered in January 2023, accusing JPMorgan of opportunistically repricing the warrants to benefit from the stock’s volatility, thereby violating the terms of their contract.
On November 29, 2024, both companies submitted a joint court filing in Manhattan, stating they would drop their claims against each other. The terms of any settlement were not disclosed, leaving it unclear whether a financial agreement was reached. This resolution paves the way for a renewed commercial relationship between the two firms.
The legal contention originated from a 2014 agreement in which Tesla sold stock warrants to JPMorgan. These warrants allowed the bank to purchase Tesla shares at a predetermined “strike” price upon expiration in June and July 2021. The agreement included provisions permitting JPMorgan to adjust the strike price in response to significant corporate events, such as Musk’s 2018 tweet about taking Tesla private. Following the tweet, JPMorgan reduced the strike price to reflect the potential transaction and later adjusted it again when Musk abandoned the privatization plan.
Tesla’s stock price experienced substantial growth between 2018 and the warrants’ expiration in 2021, leading JPMorgan to assert that Tesla owed shares or cash under the terms of their agreement. Tesla disputed this claim, resulting in the lawsuits that have now been dismissed.
This settlement concludes a notable legal dispute between two major corporations and highlights the complexities that can arise from executive communications impacting stock prices and contractual agreements. The dismissal allows both companies to move forward without the overhang of litigation, potentially fostering improved business relations in the future.
