From Delaware to Texas Elon Musk Files to Move Incorporation Site

Paresh Jadhav

10 months ago

Elon Musk has taken steps to relocate his companies following a court ruling against his compensation package. SpaceX filed Wednesday to move its incorporation from Delaware to Texas while Neuralink, his brain-chip implant company, changed to Nevada this week.

Both moves come after a court ruling deemed his 2018 Tesla pay package excessive. Delaware has long been seen as the home for America’s top businesses to incorporate, but other states are increasingly creating business-focused courts to attract them.

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Delaware’s dominance in corporate filings is waning

Elon Musk, CEO of SpaceX and brain-chip company Neuralink, has long advocated that companies move their incorporation sites out of Delaware. Now SpaceX is following his advice by moving its headquarters and business incorporation out of Delaware and into Texas following a ruling by a Delaware judge that barred Musk’s historic compensation package at Tesla worth $56 billion in options.

Race-to-the-bottom theorists contend that self-interested managers tend to favor laws which allow them to exploit shareholders and other corporate participants, or, as game theory calls it, exploit defects. Their view is that corporations choose where to incorporate in order to maximize value by taking advantage of what’s on offer.

Concerning the Race-to-the-Bottom Theory’s claims that Delaware law is particularly unfavorable, it is difficult to ascertain exactly what this implies. But one thing is certain – Delaware has been drastically transformed by market forces since early liberalization; compulsory regulation for minimum capitalization, par value and preemptive rights was eliminated and compulsory fiduciary duties reduced significantly; merger or combinations without shareholder approval became permissible as well.

Race-to-the-bottom theorists claim that these changes will benefit shareholders; but even if that were true, it seems hard to imagine that law is simply accommodating managerial temptations to break their obligations or leave investors vulnerable against dishonesty.

Musk’s strong preference for Texas and Nevada

Elon Musk has long preferred Texas and Nevada for business registration, citing lower taxes and less-stringent regulations as reasons to move operations there. SpaceX recently made headlines when they moved their legal domicile from Delaware to Texas to better align its operational base which primarily exists there; Neuralink Corp, another one of Musk’s companies also made this shift back in February.

SpaceX’s move is part of a wider trend to challenge Delaware, the home to many of America’s largest companies incorporated to seek approval for mergers or litigate disputes. Officials in other states, like Texas, are marketing themselves as potential competitors to Delaware by advertising more accommodating corporate rules in their state.

Musk announced his company had relocated its state of incorporation from Delaware to Texas on Wednesday via his social media platform X, posting an announcement and screenshot from Texas Secretary of State office that indicated this change had taken effect. Musk has long advocated that more companies switch from Delaware and incorporate in Texas or Nevada where he has a significant presence.

Tesla’s move to Texas

Tesla’s decision to relocate its corporate headquarters from California to Austin in 2021 has proven beneficial to local real estate. Furthermore, Tesla invested in an $880-million factory project under construction in Hutto in East Williamson County where they plan to expand operations and create more jobs. Not only is Tesla located here; two of Elon Musk’s other companies The Boring Company and Neuralink also maintain offices here.

This move by the company reflects a rising preference among business investors for states like Texas and Nevada that do not charge sales taxes on intellectual property, which could weaken Delaware’s longstanding dominance as the premier location for incorporation because of its favorable legal and tax conditions.

Musk made his announcement via social media platform X, where he announced SpaceX had filed to relocate from Delaware to Texas as the incorporation location. He asked shareholders for input before polling on this matter publicly; and noted that Texas won the “unanimous public vote.” Musk indicated he would move immediately to hold shareholder votes on this matter; adding that another of his companies, Neuralink had also moved its incorporation location from Delaware to Nevada.