JPMorgan Chase & Co. (NYSE:JPM) has decided to withdraw its lawsuit against Tesla Inc. (NASDAQ:TSLA), which was centered around a breach of contract involving stock warrants from 2014.
What Happened: This resolution was revealed through a court filing in Manhattan, indicating that both parties have agreed to drop their claims against each other, reported Reuters.
The lawsuit, initiated by JPMorgan in November 2021, sought $162.2 million. The bank alleged that Tesla breached the contract following a 2018 post by CEO Elon Musk, which suggested taking Tesla private at $420 per share.
This post, according to JPMorgan, led to significant stock price volatility, necessitating adjustments to the strike price of the warrants.
JPMorgan argued that the post required them to reprice the warrants, and Tesla’s failure to compensate for the subsequent stock price increase led to the lawsuit.
Tesla countersued in January 2023, accusing JPMorgan of attempting to gain a “windfall” through the repricing. The settlement terms remain undisclosed.
Why It Matters: The roots of this legal battle trace back to Elon Musk’s post in August 2018, where he mentioned considering taking Tesla private at $420 per share, claiming to have secured funding.
This caused a spike in Tesla’s stock price and led to a series of events, including a fraud charge by the SEC against Musk.
The lawsuit by JPMorgan, filed in November 2021, was a direct result of the financial implications of Musk’s post. The settlement marks the end of a prolonged legal dispute that has been closely watched by investors and industry observers.
Price Action: Tesla stock closed at $345.16 on Friday, up 3.7%. The stock is up nearly 39% year-to-date, according to Benzinga Pro data.
The Tesla stock has a consensus rating of "Neutral." The highest price target is $400, while the consensus price target is $232.20, implying a 33% downside.
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