SpaceX, the rocket company founded and led by billionaire Elon Musk, has officially changed its state of incorporation from Delaware to Texas, following a legal dispute with Tesla, another company headed by Musk. The move is seen as a sign of Musk’s growing affinity for the Lone Star State, where he has been expanding his business and personal presence in recent years.
What prompted the move?
The decision to move SpaceX’s legal home from Delaware to Texas was announced by Musk on his social media platform X, formerly Twitter, on February 15, 2024. He said: “SpaceX has moved its state of incorporation from Delaware to Texas! If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible.”
Musk’s recommendation came after a Delaware judge annulled his $56 billion pay package from Tesla, the electric car maker that he also leads as CEO. The judge ruled that the compensation deal, which was approved by Tesla shareholders in 2018, was “unfathomable” and “inappropriately set” by the board, which was influenced by Musk’s “superstar appeal”. The lawsuit was filed by a Tesla shareholder who claimed that the pay package was excessive and unfair.
Musk, who is known for his ambitious and sometimes controversial projects, such as colonizing Mars and implanting brain chips, testified during the trial that he planned to use the money to fund his interplanetary travel. He also said that he did not care about the money and that he would give it all away.
Musk, who has an estimated net worth of around $200 billion, also said that he would hold a shareholder vote to move Tesla’s state of incorporation to Texas as well. He launched a poll on X, where 87% of the respondents voted in favor of the change. He 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.”
Musk’s brain-chip implant company, Neuralink, also changed its location of incorporation from Delaware to Nevada last week.
Why Texas?
Texas has become a popular destination for Musk and his companies, as well as for other tech entrepreneurs and innovators. The state offers several advantages, such as:
- No personal or corporate income tax, which could save Musk and his companies a lot of money.
- A large and growing aerospace industry, with several facilities and launch sites for SpaceX, as well as a new factory for Tesla.
- A more favorable regulatory and political environment for innovation and entrepreneurship, compared to California, where both companies were previously headquartered.
- A lower cost of living and a higher quality of life, with a diverse and vibrant culture, cuisine, and landscape.
Musk, who was born in South Africa and moved to Canada and then to the US, has also relocated his personal residence to Texas. He sold most of his properties in California and bought a $50 million ranch near Austin, where he plans to build a futuristic city called Starbase. He also donated $30 million to schools and nonprofits in the Brownsville area, where SpaceX has a launch site.
Musk has also expressed his admiration for Texas and its people, saying: “I love Texas. It’s awesome. There’s a lot of really smart, talented, ambitious people here. And they have a great sense of humor.”
What are the implications?
The move of SpaceX’s legal home from Delaware to Texas could have significant implications for the company, as well as for the states involved. Some of the possible impacts are:
- SpaceX could save millions of dollars in taxes and fees, as well as enjoy more flexibility and autonomy in its operations and governance.
- Texas could benefit from more jobs, investments, and innovations, as well as from the prestige and publicity of hosting one of the world’s leading space companies.
- Delaware could lose some of its revenue and reputation, as well as face more competition from other states that offer more attractive incentives and conditions for businesses.
- SpaceX could face some challenges and risks, such as adapting to a different legal and cultural system, dealing with environmental and social issues, and coping with natural disasters and extreme weather.
SpaceX’s move from Delaware to Texas is not the first or the last of its kind, as more and more companies and individuals are seeking new opportunities and horizons in different states and regions. The trend reflects the dynamic and diverse nature of the US economy and society, as well as the changing preferences and priorities of its people.