Michelle ThompsonTycoon plans shareholder vote on moving after Delaware judge dismisses $56 billion compensation package as ‘unfathomable’
Elon Musk has declared that Tesla will hold a vote on transferring the company’s legal headquarters to Texas after the state of Delaware rejected his $56 billion pay plan at the electric vehicle manufacturer.
The world’s richest individual, whose No. 1 status is threatened by the Delaware judgment, sponsored a poll on X to determine if Tesla should relocate its place of incorporation from Delaware to Texas.
With over 1 million votes cast, the poll found that 87% of respondents supported relocating. Musk responded on Thursday, writing on his X account: “The public vote is unequivocally in favor of Texas!” Tesla will immediately organize a shareholder vote to change its state of incorporation to Texas.
On Tuesday, a Delaware judge ruled that a 2018 share-based compensation package handed to Tesla’s CEO was “an unfathomable sum” that was unfair to shareholders and invalidated the arrangement.
Soon after, Musk said on X, “Never incorporate your company in the state of Delaware.” He went on to say, “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters” .
Musk has significant links to Texas. He relocated Tesla’s corporate offices from Palo Alto, California, to Austin, Texas, in 2021, after criticizing California’s laws and taxation, as well as arguing with health officials at the onset of the Covid epidemic over the reopening of a Fremont factory.
One of the automaker’s gigafactories is in Texas, where it is developing a $1 billion (£800 million) lithium refinery with the goal of producing enough battery-grade lithium for around 1 million vehicles by 2025.
Other Musk companies, like SpaceX and the Boring Company, have operations in Texas. Another Musk-related Texas expansion is underway at X, which he also controls. Last month, the social media platform announced that it would create a content moderation center in Austin with 100 employees.
It was unclear whether the Tesla board endorsed Musk’s X disclosure on Thursday. In her opinion on Tuesday, Delaware judge Kathaleen McCormick noted that Musk, a 13% shareholder in Tesla, had “thick ties” with the directors negotiating his 2018 package and had “dominated the process that led to board approval of his compensation plan”.
According to Brian Quinn, a professor at Boston College Law School, relocation to Texas “will require the board to initiate the reincorporation.” He went on to say: “So, if he hasn’t he should drop them a line because it’s supposed to be a board call, not the result of a poll on X.”
Quinn stated that relocating to Texas would not change the underlying legislation behind the Delaware verdict, but the state’s establishment of a new business court means it will seek to demonstrate that the court is “a fair forum for the adjudication of business disputes.”
“Having Elon Musk as their first customer would not help that endeavor, as he expects them to bend to managers’ interests. “He’s putting Texas in a tough spot,” he added.
Two weeks before the Delaware decision, Musk challenged the board by posting on X that he needed to possess 25% of Tesla’s voting shares or risk developing unnamed artificial intelligence and robotics projects outside the firm.
According to the Bloomberg billionaires index, Musk is worth $202 billion, more than the luxury goods magnate Bernard Arnault ($183 billion) and Amazon founder Jeff Bezos ($180 billion).
