Texas Gov. Greg Abbott (R) extended an invitation to Tesla CEO Elon Musk on Thursday, urging him to consider relocating the company’s corporate headquarters to the Lone Star state.
Abbott expressed his support for the idea on the social media platform X, stating, “@Tesla in Texas. It just makes sense.”
Earlier this week, Elon Musk conducted a poll on X, seeking public opinion on whether Tesla should change its state of incorporation to Texas, where its main physical headquarters are located. The poll’s outcome revealed a substantial 81.7% of the over 1.1 million X users who participated voted in favor of the move, while 12.9% voted against it.
On Thursday, Elon Musk announced that the company would conduct a shareholder vote to move its incorporation state from Delaware to Texas. Musk said, “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.”
This decision came after a Delaware judge, Kathaleen McCormick, invalidated Musk’s $56 billion pay package. On Tuesday, Judge McCormick characterized the 2018 share-based pay package, the largest in corporate America, as an “unfathomable sum” that was unjust to shareholders. She also concluded that the package had been negotiated by directors who seemed excessively influenced by Musk.
Elon Musk took to X to advise against incorporating your company in the state of Delaware following the ruling. He wrote, “Never incorporate your company in the state of Delaware.”
Gov. Abbott applauds Elon Musk's plan to move Tesla's state of incorporation to Texas | Just The News https://t.co/b5JWBY9pDX
— John Solomon (@jsolomonReports) February 1, 2024
If Musk proceeds with the vote, garnering shareholder support may prove challenging. Legal experts suggest that he could potentially encounter investor lawsuits, especially if such a move is perceived as an attempt to secure his pay package.
Independent business advisor Keith Donovan emphasized the importance for shareholders to carefully assess how transitioning out of Delaware might affect their rights and the company’s governance.
There may also be a debate regarding the extent of support Elon Musk would require to modify Tesla’s governing regulations for the relocation.
If Tesla were to adopt a Texas charter that maintains the existing provisions requiring a supermajority, it would likely be permitted to relocate to Texas with a simple majority, as suggested by Ann Lipton, a professor at Tulane University Law School.
Other prominent companies that have relocated to Texas in recent years include NRG Energy and Hewlett Packard Enterprise.
