JPMorgan Chase & Co. (JPM) is suing Tesla (TSLA) in a dispute involving warrants. The CNBC reports that the investment bank is seeking up to $162.2 million plus interest, attorney’s fees, and expenses as part of the suit.
Tesla is a U.S. company that designs, manufactures, and sells fully electric cars, solar energy generation systems, and energy storage products. The company also operates a network of vehicle service centers and supercharger stations. (See Top Smart Score Stocks on TipRanks)
JPMorgan’s Claims
In the lawsuit, JPMorgan alleges that Tesla did not adhere to the terms of a contract pertaining to the re-pricing of the warrants in question. According to the lawsuit, the EV giant was supposed to deliver shares, or cash, on its share price moving above a set strike price by a certain expiration date.
According to CNBC, the lawsuit stems back to 2018 when Tesla CEO Elon Musk announced he was planning to take the company private for $420 but rescinded the idea a few weeks later. JPMorgan alleges that it had a right to make adjustments to the warrants.
Tesla’s Defense
In the complaint, JPMorgan insists that Tesla failed to deliver 228,775 shares, leaving it with an open hedge position equal to a shortfall. Tesla, on its defense, insists that the adjustments were unreasonably swift, amounting to an opportunistic attempt to take advantage of Tesla stock volatility.
Stock Rating
Late last month, Morgan Stanley analyst Adam Jonas reiterated a Buy rating on Tesla stock with a $1,200 price target implying 14.7% upside potential to current levels. According to the analyst, Tesla is poised for higher vehicle sales in the coming years as it continues to demonstrate manufacturing leadership in the EV space.
Consensus among analysts is a Hold based on 10 Buys, six Holds, and seven Sells. The average Tesla price target of $850.24 implies 18.7% downside potential to current levels.
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