- Elon Musk has announced that he has moved the incorporation of his space exploration company Space X to Texas from Delaware.
- The move comes weeks after a Delaware judge ruled that the Tesla compensation package he received was seriously flawed and he was ordered to return it.
- The ruling arose from a lawsuit filed by a shareholder, who said Musk’s ties to the directors who negotiated the $56 billion package were not disclosed.
Elon Musk has moved the incorporation status of his company SpaceX from Delaware to Texas, after a court in the former state voided his $55 billion Tesla compensation package.
In a post on X, Musk wrote: ‘SpaceX has moved its state of incorporation from Delaware to Texas!
“If your company is still incorporated in Delaware, I recommend that you move to another state as soon as possible.”
The move comes after Judge Kathaleen McCormick voided Musk’s compensation package from the company, which helped make him the richest person in the world.
The ruling arose from a lawsuit filed by a shareholder, who said Musk’s ties to the directors who negotiated the extraordinary package were not disclosed.
The compensation package, valued at $56 billion, helped make Musk one of the richest people in the world.
Musk announced Wednesday that the company had converted its state of registration from Delaware to Texas.
Delaware’s ruling against Musk came more than five years after a shareholder lawsuit alleged a waste of corporate assets and unjust enrichment for Musk.
At stake was his 10-year compensation package, awarded in 2018, which offered him 12 separate stock awards, each tied to its own performance goal and each representing 1 percent of the total. Tesla shares outstanding.
Musk achieved all 12 goals, but was prohibited from selling any of the shares for at least five years under the agreement.
The package granted stock options for about 304 million shares that Musk can buy at about $23.33 each, well below Wednesday’s closing price of $188.71.
The shares in question will now be canceled, but Musk has not yet exercised any of the options, meaning his stake in Tesla remains at 13 percent.
The plan had a maximum value of $55.8 billion and a fair value of $2.6 billion on the grant date, making it by far the largest CEO pay package in corporate history.
The shareholder’s lawyers argued that his compensation package should be voided because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of him.
McCormick in his ruling found that the process that led to the board’s approval of his 2018 compensation package was “deeply flawed” because of how close Musk was to some of his members.
McCormick in his ruling found that the process leading up to the board’s approval of his 2018 compensation package was “deeply flawed.”
The move comes after Judge Kathaleen McCormick voided Musk’s compensation package from the company, which helped make him the richest person in the world.
McCormick determined that Musk was indeed a majority shareholder, with a 21.9 percent stake in the company, influential ‘superstar CEO’ status and deep ties to the directors charged with setting his compensation.
In light of those facts, McCormick concluded that Musk’s pay package should have been subject to a more rigorous standard of review.
“The process that led to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the colorful 200-page decision.
“Musk had extensive ties to the people charged with negotiating on behalf of Tesla.”
Musk responded to the ruling by saying, “Never incorporate your company in the state of Delaware.”
Tesla is physically headquartered in the Austin, Texas Gigafactory, but is incorporated in Delaware.
“I recommend incorporating in Nevada or Texas if you prefer to let shareholders decide matters.”
The billionaire then promised to hold a shareholder vote to transfer Tesla’s incorporation status to Texas.
Musk has fallen to the second richest person in the world with an estimated worth of Forbes for a total of 198.9 billion dollars, about 17 billion dollars less than Bernard Arnault.
The ruling is not the first time Musk has suffered a setback in Delaware.
McCormick was the same judge who oversaw Twitter’s July 2022 lawsuit against Musk after he attempted to terminate his contract to buy the social media platform for $44 billion.
The judge rejected his delaying tactics and Musk finally closed the deal to buy the company.
Musk is expected to file an appeal with the Delaware State Supreme Court regarding his pay package.
If the ruling stands, you will lose your options, but not the shares you previously owned.