Tesla shareholders to vote on transferring incorporation from Delaware to Texas

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Tesla will hold a shareholder vote to transfer its state of incorporation to Texas, CEO Elon Musk announced after a Delaware judge voided his $56 billion pay package.

On Tuesday, Delaware judge Kathaleen McCormick sided with Tesla investors who had challenged the 2018 share-based pay package, ruling that the “unfathomable sum” was unfair to shareholders and negotiated by directors who appeared beholden to Musk.

“Never incorporate your company in the state of Delaware,” Musk posted on X, formerly Twitter, after the ruling came down. 

In a follow-up post on X, Musk polled the platform’s users, asking, “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?” The results of the poll were 87.1% “Yes” and 12.9% “No” after more than 1.1 million users voted.

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Tesla's CEO Elon Musk in a car in Beijing, China

Tesla Chief Executive Officer Elon Musk gets in a Tesla car as he leaves a hotel in Beijing, China, on May 31, 2023. (REUTERS/Tingshu Wang / Reuters Photos)

“The public vote is unequivocally in favor of Texas!” Musk declared early Thursday. “Tesla will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.”

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Texas is currently the home of Tesla’s corporate headquarters. 

Musk moved the company from Palo Alto, California, to Austin, Texas in 2021 in protest of California’s heavy regulations and high taxes. He had also clashed with the state’s health officials during the COVID-19 pandemic over reopening a factory in Fremont.

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Tesla's gigafactory in Austin, Texas

Electric vehicles parked outside the Tesla Gigafactory in Austin, Texas, on June 23, 2022. (Jordan Vonderhaar/Bloomberg via Getty Images / Getty Images)

The Lone Star State is also host to one of the EV maker’s gigafactories, which is currently planning a $750 million expansion. Musk has additional plans to build a lithium refinery in the state, which he has said will produce lithium for “about a million vehicles” and have more lithium refining capacity than “the rest of North American refining capacity combined.” 

Musk’s other companies, like SpaceX and The Boring Company, also have operations in Texas.

More than 65 percent of all Fortune 500 companies and more than half of all U.S. publicly traded companies are incorporated in the state of Delaware, drawn to the state by its business-friendly corporate laws and tax benefits, according to Harvard Business Services, a firm offering Delaware business formation services.

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Elon Musk

SpaceX, X (formerly known as Twitter), and Tesla CEO Elon Musk speaks during a live interview on Jan. 22, 2024.  (Photo by Omar Marques/Getty Images / Getty Images)

But Musk has faced several challenges in the First State. 

McCormick was the same judge who presided over Twitter’s July 2022 lawsuit against Musk after he tried to cancel his $44 billion deal to buy the social media platform. The judge rejected his attempts to delay the deal, and it was ultimately finalized and now re-branded as X.

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“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters,” Musk said in another post on X after McCormick’s ruling on his pay package.

Tesla shares were up nearly 2% in pre-market trading Thursday. 

FOX Business’ Eric Revell and Reuters contributed to this report.

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