Neuralink, the brain implant company founded by Elon Musk, has recently made a significant move by changing its legal corporate home from Delaware to Nevada. This decision comes in the wake of a Delaware judge striking down Musk’s $55.8 billion pay package as CEO of Tesla, a separate company also associated with Musk. Neuralink, which is physically headquartered in Fremont, California, completed the transition to a Nevada company on Thursday, as confirmed by state records. Additionally, Delaware records now indicate that Neuralink’s legal home is in Nevada.
The motivation behind this move can be traced back to Musk’s public statements on X (formerly Twitter), where he expressed his dissatisfaction with incorporating companies in Delaware. In response to the court ruling on his pay package, Musk advised against incorporating in Delaware and recommended Nevada or Texas as preferable options for shareholders to have a say in company matters.
The choice to establish legal shop in Delaware has long been favored by most corporations due to the state’s business-friendly laws. However, legal experts argue that Delaware’s favorable environment primarily benefits company management rather than shareholders. Erik Gordon, a business and law professor at the University of Michigan, explains that Delaware’s reputation as a preferred state of incorporation is built on its friendliness towards company management.
The ruling that invalidated Musk’s pay package was delivered by Delaware Chancellor Kathaleen St. Jude McCormick on January 30. McCormick deemed the process of establishing the package as “flawed” and the price as “unfair.” She referred to it as “the largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude.” As a result of this ruling, Musk lost his top spot on Forbes’ list of wealthiest individuals.
Musk’s involvement with Neuralink is significant, as he is listed as the company president in Nevada documents. However, no comments have been provided by Neuralink or Tesla regarding this recent development.
McCormick’s ruling was based on her determination that Tesla’s board lacked independence from Musk. Musk’s lawyers argued that the pay package needed to be substantial in order to incentivize him to stay with the company. However, the judge dismissed this argument, stating that the board failed to question whether the plan was necessary for Tesla to retain Musk and achieve its goals.
Supporters of Musk argue that he should not be compensated like other CEOs because he is not like other CEOs. They emphasize the inseparable connection between Musk and Tesla, asserting that his role as CEO is crucial for the company’s growth. Musk’s leadership has transformed Tesla from a mere idea into the world’s most valuable automaker, surpassing other companies in electric vehicle sales. His star power also generates free publicity, reducing the need for extensive advertising. Furthermore, his success has compelled the rest of the auto industry to expedite their plans for electric vehicles in order to keep up with Tesla’s remarkable growth.
McCormick’s ruling comes five years after shareholders filed a lawsuit accusing Musk and Tesla directors of breaching their duties. The lawsuit argued that the pay package resulted from sham negotiations with directors who lacked independence from Musk. In response, the defense claimed that the pay plan was fairly negotiated by an independent compensation committee, which had set lofty performance milestones.
In a separate update, Musk revealed on X last month that Neuralink had successfully implanted its first device in a human patient. However, no further details about the patient or the implant were provided by the billionaire entrepreneur.
Overall, Neuralink’s decision to relocate its legal corporate home from Delaware to Nevada reflects the ongoing developments and challenges faced by Elon Musk and his associated companies. As Musk continues to push boundaries in various industries, his influence and impact remain significant factors in shaping the future of technology and innovation.