- Elon Musk has announced that he has moved the founding of his space company Space X from Delaware to Texas
- The move comes weeks after a Delaware judge ruled that the Tesla compensation package he received was deeply flawed and was ordered to pay it back.
- The ruling stemmed from a lawsuit filed by a shareholder who said Musk’s ties to executives who negotiated the $56 billion package had not been made public.
Elon Musk has moved the state of incorporation of his company SpaceX from Delaware to Texas after a court in the former state revoked 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 invalidated Musk’s compensation package from the company, making him the richest person in the world.
The ruling stemmed from a lawsuit filed by a shareholder who said Musk’s ties to executives who negotiated the bumper package had not been made public.
The compensation, worth $56 billion, has made Musk one of the richest people in the world
Musk announced on Wednesday that the company had switched its registration status from Delaware to Texas
Delaware’s ruling against Musk came more than five years after a shareholder lawsuit alleged a waste of company assets and unjust enrichment for Musk.
At issue was his 10-year compensation package, awarded in 2018, which offered him 12 separate stock awards, each tied to its own performance target, and each representing 1 percent of Tesla’s total outstanding shares.
Musk achieved all twelve goals, but was not allowed to sell any of the shares for at least five years, according to the agreement.
The package granted stock option grants for about 304 million shares that Musk can buy for about $23.33 each, well below Wednesday’s closing price of $188.71.
The shares in question are now being canceled, but Musk had not yet exercised any of the options, meaning his ownership stake in Tesla is still 13 percent.
The plan had a maximum value of $55.8 billion and a fair value of $2.6 billion at grant date, making it by far the largest CEO compensation package in company 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 found in her ruling that the process leading to the board’s approval of his 2018 compensation package was “deeply flawed” due to Musk’s close relationship with some of his members.
McCormick found in her ruling that the process leading to the board’s approval of his 2018 compensation package was “deeply flawed”
The move comes after Judge Kathaleen McCormick annulled Musk’s compensation package from the company, making him the richest person in the world.
McCormick found that Musk was in fact a controlling shareholder, with a 21.9 percent stake in the company, an influential “Superstar CEO” status and close ties to the directors charged with setting his compensation.
In light of these facts, McCormick felt that Musk’s pay package should have been subject to a stricter standard of review.
“The process leading to the approval of Musk’s compensation plan was deeply flawed,” McCormick wrote in the colorfully worded 200-page decision.
“Musk had extensive ties to the individuals tasked with negotiating on Tesla’s behalf.”
Musk walked back the statement and said, “Never incorporate your company in the state of Delaware.
Tesla has its physical headquarters in the Austin, Texas Gigafactory, but is incorporated in Delaware
“I recommend incorporating in Nevada or Texas if you prefer shareholders to decide things.”
The billionaire then promised to hold a shareholder vote to transfer Tesla’s state of incorporation to Texas.
Musk has fallen to the second richest person in the world, with an estimated net worth of approx Forbes totaling $198.9 billion, about $17 billion behind 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 tried to back out of his contract to buy the social media platform for $44 billion.
The judge rejected his delaying tactics and Musk ultimately went through with the deal to buy the company.
Musk is expected to appeal to the Delaware State Supreme Court regarding his pay package.
If the ruling stands, he will lose his options, but not the shares he previously owned.