Calling all Tesla shareholders: Elon Musk wants to change the business’s state of incorporation to Texas following a public vote.
Although the EV maker’s physical headquarters is in Austin, the Musk-led company—like many others in the Fortune 500—chose Delaware to incorporate in, courtesy of its attractive legislation.
But after a judge ruled Musk’s 2018 pay package—worth $56 billion—as null and void, the entrepreneur launched a barrage of criticism against the state.
“Never incorporate your company in the state of Delaware,” he wrote on X—the social media platform he owns—on Tuesday. He added: “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”
It seems the Tesla CEO now wants to take a piece of his own advice.
In now typical Musk fashion, the entrepreneur asked X users to vote on whether Tesla should stay in Delaware or change its state of incorporation to Texas.
More than 87% of respondents backed Musk on a move to Texas, leading Musk to post in the early hours of Thursday morning: “The public vote is unequivocally in favor of Texas! Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.”
The public vote is unequivocally in favor of Texas!
— Elon Musk (@elonmusk) February 1, 2024
Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas. https://t.co/ParwqQvS3d
The richest man on earth’s recent falling out with the state began after a Tesla investor brought a suit claiming Musk’s $55.8 billion pay package in 2018—approved by the board—was excessive.
This week judge Kathaleen McCormick sided with the claimant, saying the stock options Musk was awarded more than five years ago must be renegotiated.
In a 200-page investigation into the matter McCormick also set out a scathing review of Tesla’s board.
“The testimony from the key witnesses is perhaps as close to an admission of a controlled mindset as a stockholder-plaintiff will ever get,” she wrote.
Will Texas be better for Tesla than Delaware?
While Tesla did not immediately respond to Fortune’s request for comment, Musk has made it clear he wants action to begin promptly.
Yet even Musk’s supporters on X have made it clear shareholders should know what the implications of the move are before voting. “Please make sure Tesla outlines all of the advantages and disadvantages,” a Canada-based support account wrote.
The benefits of incorporating in Delaware are well known, which is why it’s proved so popular.
The state is home to the famed Court of Chancery, set up exclusively to deal with corporate cases, as well as certain tax incentives such as not imposing income tax on businesses that don’t do business in the state, and no share tax for shareholders who don’t live in the state.
Among the big businesses that are incorporated in Delaware, but don’t necessarily have their headquarters in the state, is Google owner Alphabet, Amazon, and banking giants JPMorgan Chase and Bank of America.
But Delaware hasn’t necessarily treated Musk in the way that he may have become accustomed to.
The voiding of his pay packet comes after the same court and judge ruled against him in 2022 when Musk was told he must honor his deal to buy social media platform Twitter for $44 billion.
Texas on the other hand is home to Musk.
It’s the state where he spends a lot of time courtesy of both Tesla and the Boring Company (a Musk-founded freight tunneling company) basing their headquarters in the region.
It’s well known that the man worth $202 billion, according to the Bloomberg Billionaires Index, has also made Texas something of a home, courtesy of the nights he spent sleeping on the factory floor of the EV maker.
On top of that, Attorney General Ken Paxton—who was recently impeached on corruption charges but acquitted by the state legislature—has already gone after Musk’s declared enemies.
Musk has in turn publicly supported Texas in its standoff with the federal government over immigration.
