Tesla CEO Elon Musk has announced plans to hold a shareholder vote on relocating the company’s legal base to Texas following a Delaware judge’s rejection of Musk’s $56 billion pay package.
The world’s wealthiest person, Musk, initiated a poll on X, Tesla’s social media platform, asking whether the company should change its state of incorporation from Delaware to Texas.
The poll, with over 1 million votes, recorded 87% in favor of the move.
In response to the poll results, Musk stated on X:
“The public vote is unequivocally in favor of Texas! Tesla will move immediately to hold a shareholder vote to transfer the state of incorporation to Texas.”
Legal Setback in Delaware
The decision to relocate comes after a Delaware judge criticized the 2018 share-based package awarded to Musk as an “unfathomable sum” and unfair to shareholders, leading to the nullification of the arrangement.
Musk, unhappy with the ruling, advised against incorporating companies in Delaware, recommending Nevada or Texas instead.
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Musk’s Strong Ties with Texas
Elon Musk has strong ties with Texas, having moved Tesla’s corporate headquarters to Austin in 2021.
Musk criticized California’s regulations and taxes, leading to the relocation.
One of Tesla’s gigafactories is located in Texas, and the company is investing in a $1 billion lithium refinery in the state.
Musk’s other ventures, including SpaceX and the Boring Company, also have operations in Texas.
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Uncertain Board Support and Legal Implications
It remains unclear whether the Tesla board supports Musk’s declaration on X.
Legal experts suggest that moving to Texas would not alter the underlying law behind the Delaware ruling.
Brian Quinn, a professor at Boston College Law School, notes that the board, not a poll on X, should initiate the reincorporation process.
He points out that Musk’s move puts Texas in a challenging position, especially as the state recently launched a new business court.
Musk’s recent challenges to the board, including his call to own 25% of Tesla’s voting shares or consider building AI and robotics products outside the company, add complexity to the situation.
Despite the legal setback and potential corporate changes, Elon Musk remains the world’s wealthiest person, with a net worth of $202 billion according to the Bloomberg Billionaires Index.
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