Elon Musk, the CEO of SpaceX, recently made a significant move by changing the company’s state of incorporation from Delaware to Texas. This decision came shortly after a Delaware court invalidated Musk’s massive compensation package at Tesla, another one of his ventures. The move to Texas was announced by Musk himself on X, formerly known as Twitter, where he encouraged other companies still incorporated in Delaware to consider relocating.
The court ruling in Delaware voided Musk’s $56 billion compensation package at Tesla, which was the largest ever given to an executive. This package played a crucial role in making Musk one of the wealthiest individuals in the world. The ruling was the result of a lawsuit filed by a shareholder who argued that Musk’s close ties with the directors who negotiated the package were not properly disclosed before a stockholder vote.
The judge also found that the performance targets set in the compensation package were easier to achieve than the company had acknowledged. Internal projections showed that Musk was already on track to qualify for significant portions of the package. The plan allowed Musk to access Tesla stock at discounted prices and was divided into 12 tranches with increasing financial and operational goals. However, it required him to hold the acquired stock for five years.
Musk expressed his dissatisfaction with the ruling on X, advising entrepreneurs and founders to avoid incorporating their companies in Delaware. He even conducted a poll on the platform, asking users whether Tesla should relocate to Texas. The majority of respondents supported the idea of moving to Texas, prompting Musk to declare that “the public vote is unequivocally in favor of Texas!” He announced that Tesla would immediately hold a shareholder vote to transfer its state of incorporation to Texas.
As a privately-held company, SpaceX had the advantage of expediting the process of changing its state of incorporation. Musk celebrated this milestone by posting the SpaceX logo superimposed on the silhouette of Texas.
This move by Elon Musk and SpaceX highlights the significance of state incorporation for businesses. While Delaware has long been a popular choice for companies due to its favorable corporate laws, this recent ruling and Musk’s reaction may lead other companies to reconsider their incorporation state. Texas, with its business-friendly environment, is emerging as an attractive alternative.
It remains to be seen how this change in state incorporation will impact SpaceX and its operations. However, it is clear that Elon Musk is not one to back down from challenges and will continue to make bold moves in his pursuit of success.