Moving Tesla's Incorporation to Texas: Musk Seeks Shareholder Vote

Tesla shareholders to leave Delaware for Texas.Photo byBloomberg / Contributor / Getty Images

Elon Musk is highly disappointed with the court ruling that took place last week. It resulted in his stocks being stuck down at places even after Tesla made payment for the package.

Tesla CEO said he is seeking shareholder approval to start a company in Texas. Shortly after announcing his 2018 pay package (worth about $51 billion at current stock prices) on Tuesday, Musk released a poll of 1.1 million votes.

A few hours later, the Tesla CEO wrote: "Public sentiment is favorable to Texas." Opinion polls showed Texas winning more than 87 percent of the roughly 1.1 million votes cast.

Musk said he would now "immediately" seek shareholder approval to establish an electric vehicle maker in the southern state.

Delaware is known as one of the most welcoming places in the world to incorporate companies of all sizes for legal and tax purposes.

About 70% of Fortune 500 companies are located here. It is considered a convenient place for merger approval and dispute resolution and is not subject to sales tax or taxes on intellectual property benefits.

Musk did not directly respond to the decision regarding his pay package but tweeted on Tuesday: "Never incorporate a company in the state of Delaware. If shareholders want to decide something, I suggest they join Nevada or Texas," he said in another tweet.

Tesla Shareholder attorneys who had brought this suit said that Mux was too close with the company directors to be able to protect their interests. They say that the package of stock options is excessive.

The current stock options that Musk has received as part of a package are worth $51 billion on Tuesday's closing price.

Kathleen McCormick, the Delaware Chancery Court Chancellor who has been overseeing the bench trial, concluded in 2022 that Musk and the Tesla board will bear the burden of proving that the compensation plan was fair. According to him, they failed to bear this burden of proof.

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