JPMorgan Chase & Co. agreed to drop a lawsuit it filed against Tesla Inc. three years ago seeking $162 million tied to stock warrant transactions.
The move to end the litigation was announced Friday in a one-page court filing by both sides, in which they dropped their claims against each other without the ability to refile them. They didn’t disclose any settlement agreement.
“JPMorgan and Tesla have decided to enter into a new commercial relationship and settle the outstanding disputes between the companies,” a bank spokesperson said in an emailed statement Saturday. “This is a good outcome for all and we look forward to working together.”
In its 2021 suit against Elon Musk’s electric vehicle maker, JPMorgan claimed it was owed Tesla shares worth the amount it sought, based on a 2014 agreement. Under that pact, if the stock traded above a certain price, Tesla would owe JPMorgan a payment in shares or cash.
The transaction was designed to help the automaker mitigate the risk that its stock would be diluted by the issuance of convertible notes and to make certain federal income tax deductions, according to the suit.
But an August 2018 tweet by Musk complicated the deal, the bank said in its suit. In the now-famous tweet, the Tesla chief executive officer said he was considering taking the company private at $420 a share and that he had “funding secured.”
JPMorgan said it had the discretion to adjust the strike price of the warrants based on factors including the volatility of Tesla’s stock. It made adjustments after the tweet and when Musk abandoned the matter.
Tesla then filed its own claims that JPMorgan had taken advantage of the tweet to reduce the strike price of more than 1.9 million warrants. It called the bank’s suit a bad-faith breach of their agreement and a “cynical” attempt to reap a windfall from the deal.
Tesla and its lawyers didn’t immediately respond to requests for comment on Friday’s filing dropping the claims.
The filing follows a ruling against JPMorgan in September by the Manhattan federal judge overseeing the case. In the ruling, US District Judge Paul Gardephe denied the bank’s request that he rule in favor of its breach-of-contract claims and against Tesla’s claims before trial.
The case is JPMorgan Chase Bank v. Tesla Inc., 21-cv-9441, US District Court, Southern District of New York (Manhattan).
