SpaceX moves incorporation to Texas, as Musk continues to blast Delaware

Must read

Elon Musk’s rocket company SpaceX has transferred its incorporation from Delaware to Texas, the CEO and co-founder posted on X. 

The move comes just weeks after a Delaware judge struck down Musk’s $55.8 billion pay package as CEO of Tesla, prompting the billionaire to lash out against the state on social media, urging other companies to depart Delaware as well. 

“SpaceX has moved its state of incorporation from Delaware to Texas!” Musk wrote in a post on Tuesday, adding, “If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible.” 

At the root of Musk’s ire is a lawsuit filed by a Tesla shareholder, Richard Tornetta, in 2018, accusing Musk and Tesla’s board of directors of breaching their fiduciary duties to the company and its stockholders when they signed off on a multibillion-dollar pay plan agreement allegedly resulting in the unjust enrichment of Musk. 

After failed attempts by Tesla to dismiss the lawsuit, Musk testified in November that he had no involvement in setting the terms of the payout. In January, however, Delaware Chancery Court Judge Kathaleen McCormick struck down the record pay package, ruling that the negotiation process was “flawed” and the price “unfair.” 

“Never incorporate your company in the state of Delaware,” Musk posted on X following the ruling, later adding, “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”

Betting on Texas

SpaceX is Musk’s second business to be reincorporated from Delaware to a new state since the January ruling. Neuralink, Musk’s brain implant company, moved its legal corporate home from Delaware to Nevada earlier this month.

The switch came after Musk posted on X that he would “move immediately” to have Tesla shareholders hold a vote on transferring the company’s corporate listing from Delaware to Texas, based on “unequivocal” public support.

Considered one of the most corporation-friendly states in terms of its laws, Delaware is the “leading domicile for U.S. and international corporations,” with more than a million businesses incorporated there, according to the state’s website

“Delaware built its preferred state of incorporation business by being friendly to company management, not shareholders,” Erik Gordon, a business and law professor at the University of Michigan, told CBS News earlier this month.

While Musk seems confident that Texas would provide a far more welcoming legal home for Tesla if he were to reincorporate his electric car company there, that might not necessarily be the case, according to one legal expert. 

“The last thing Texas is going to want is a reputation that their corporate law is a game where billionaires always win, because then investors aren’t going to trust it,” University of Nevada law professor Benjamin Edwards told the Economic Times in a recent article.

Tesla shares rose 5% on Tuesday.

— The Associated Press contributed to this report.

Thanks for reading CBS NEWS.

Create your free account or log in

for more features.

Please enter email address to continue

Please enter valid email address to continue

More articles

Latest article