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JPMorgan sues Tesla for $162 million over warrants, Musk tweets

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November 16, 2021

By Jonathan Stempel

NEW YORK (Reuters) -JPMorgan Chase & Co on Monday sued Tesla Inc for $162.2 million, accusing Elon Musk’s electric car company of “flagrantly” breaching a contract related to stock warrants after its share price soared.

According to the complaint filed in Manhattan federal court, Tesla in 2014 sold warrants to JPMorgan that would pay off if their “strike price” were below Tesla’s share price upon the warrants’ expiration in June and July 2021.

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JPMorgan, which said it had authority to adjust the strike price, said it substantially reduced the strike price after Musk’s Aug. 7, 2018 tweet that he might take Tesla private at $420 per share and had “funding secured,” and reversed some of the reduction when Musk abandoned the idea 17 days later.

But Tesla’s share price rose approximately 10-fold by the time the warrants expired, and JPMorgan said this required Tesla under its contract to deliver shares of its stock or cash. The bank said Tesla’s failure to do that amounted to a default.

“Though JPMorgan’s adjustments were appropriate and contractually required,” the complaint said, “Tesla has flagrantly ignored its clear contractual obligation to pay JPMorgan in full.”

Tesla did not immediately respond to requests for comment after market hours.

According to the complaint, Tesla sold the warrants to reduce potential stock dilution from a separate convertible bond sale and to lower its federal income taxes.

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JPMorgan said it had been contractually entitled to adjust the warrants’ terms following “significant corporate transactions involving Tesla.”

The automaker in February 2019 complained that the bank’s adjustments were “an opportunistic attempt to take advantage of changes in volatility in Tesla’s stock,” but did not challenge the underlying calculations, JPMorgan said.

Musk’s tweets led to U.S. Securities and Exchange Commission civil charges and $20 million fines against both him and Tesla.

(Reporting by Jonathan Stempel in New York; Editing by Chris Reese and Cynthia Osterman)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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