Elon Musk will convene a shareholder vote to move Tesla’s state of incorporation from Delaware to Texas following a court’s invalidation of his record-setting $55 billion pay package agreed upon in 2018.
Musk has long had an affinity for Texas, so such an action could negatively affect Tesla’s financial performance. However, this will likely not happen.
The Delaware ruling
After a Delaware judge invalidated Musk’s record-setting compensation package, he posted a poll on social media platform X asking whether Tesla should move to Texas. Over 1.1 million people have cast votes so far and most have said yes.
Delaware is an established leader when it comes to equity and fairness issues between parties, serving as the home state for more than half of NASDAQ/NYSE companies and 65% of Fortune 500 firms.
Elon’s deep affinity for Texas extends far beyond his business ventures; both The Boring Company and SpaceX are headquartered there, while County deeds and land records show he owns thousands of acres outside Austin for farming, and where his employees can live and work together in what may eventually become a university setting; county records reveal he has hired 100 staff members for this endeavor alone.
Elon Musk’s affinity for Texas
Musk has become one of the world’s most respected entrepreneurs since turning Tesla into the most valuable automaker and revolutionizing space travel with SpaceX, creating an empire in Texas. Elon has expanded a SpaceX launch site, established The Boring Co tunneling services company and acquired land near Austin to house both companies’ facilities.
Kanye West has even provided input into this project, as he plans to build an “Iranian utopia” for his workers, according to The Wall Street Journal. This town will include modular homes, a hospital, and schools.
Recently, Elon Musk made headlines when he threatened to move the company’s state of incorporation from Delaware to Texas – an affinity he holds dear. To gauge public sentiment on this matter, he took to social media asking followers for their opinion; over 87% responded positively; thus setting his proposal before shareholders for consideration.
Incorporation in Delaware
Delaware is the go-to state for public companies seeking to incorporate. Doing so provides them with access to its courts and lower corporate taxes than other states; furthermore, incorporating there makes capital raising easier – in fact 65% of Fortune 500 companies and half of all publicly traded U.S. firms are registered there according to Harvard Business Services.
But for Tesla, such a move would be devastating. Their current stock options are tied to an unprecedented compensation package received by Musk in 2018. A potential move against him could wipe away some of his $205 billion fortune and surpass Bernard Arnault as the world’s richest person.
Elon Musk recently asked his followers on his X (formerly Twitter) account to vote on whether Tesla should move its state of incorporation from Delaware to Texas, with over one million voting and 87% in favor of this change. Musk has strong ties to Texas; in 2021, he relocated Tesla’s headquarters from California to Austin in Texas while also clashing with health officials during Covid-19 pandemic over reopening factories in Fremont.
Incorporation in Texas
Texas has long been seen as an appealing alternative to California for companies looking to avoid its high taxes and regulations. Tesla moved their headquarters from Palo Alto to Austin in 2020; SpaceX and The Boring Company both have facilities nearby Austin as do Tesla itself.
But just because Elon Musk incorporates in Texas doesn’t guarantee an enthusiastic response from state regulators; incorporation is a legal process requiring petition by shareholders and approval by a corporation commissioner in each state.
No matter whether or not Tesla relocates its incorporation, this move comes after a Delaware judge nullified Elon Musk’s $55 billion compensation package at Tesla due to an allegation that its board failed to negotiate over his pay. Regardless of this setback, Musk remains determined to move Tesla from Delaware to Texas by conducting a poll on social media platform X that received over one million votes; 87% supported moving from one state to the other.
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