JPMorgan sues Elon Musk for alleged breach of contract

Tesla faces some serious money problems. A lawsuit over CEO Elon Musk tweeting out big debt acquisition talk could be the end of the road for the beleaguered company.

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JPMorgan sued Elon Musk over a high-profile tweet that earned the company at least $162m, according to court documents filed in federal court in California on Wednesday. The bank won the lawsuit, and could potentially receive double the amount it is owed for violating Musk’s confidentiality contract.

The lawsuit, filed in March, demands that Tesla hand over about $30m that JPMorgan claims Musk received from its bonds and convertible notes when he stepped down as the company’s CEO last month. It also says the company owes at least $164m for violating a confidentiality agreement that Musk signed last year. The bank sued Tesla, Musk and Richard Shelmerdine, the company’s former chief financial officer, for breach of contract.

As part of the agreement, Musk agreed not to comment publicly about Tesla and its prospects, unless a material disclosure was being made to investors.

JPMorgan believes Musk violated the agreement by tweeting in August that the electric car company had secured funding to acquire SolarCity, which Musk owns a big stake in. Tesla later said Musk’s tweet was just a “satirical tweet”, but he was nonetheless accused of insider trading.

The disclosure set off an extraordinary and costly tug-of-war between Musk and the Securities and Exchange Commission, which filed a lawsuit against Musk in September, which Musk called “absurd”.

When faced with the prospect of a potentially costly and distracting battle, Musk made the decision to step down as CEO on 20 August. Two days later, he tweeted the deal for a merger was off, adding, “Shareholders will vote on a transaction closing at our October shareholder meeting.”

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The bank also claimed in its lawsuit that in addition to breaching a confidentiality agreement, Musk violated the firm’s bonds and convertible notes.

The lawsuit said Musk had agreed to take a smaller, non-convertible portion of the more than $2bn in convertible notes issued in December 2013.

A spokeswoman for Tesla did not immediately respond to a request for comment.

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