The Big Loser in Tesla s Shareholder Vote Is Delaware – WSJ

Tesla s TSLA -2.44%decrease; red down pointing triangle reincorporation in Texas is about much more than saving the electric-car juggernaut $250,000 a year in state fees. It is an attempt by Elon Musk to loosen Delaware s grip on American corporations. 

About two-thirds of S&P 500 companies regardless of where they are actually based are incorporated in Delaware, largely because the tiny state has specialized courts that handle business matters and stacks of legal precedents for addressing such disputes.

Musk asked shareholders to approve the move after the Tesla chief executive lost a case in a Delaware court over his pay package, recently valued at about $46 billion. Shareholders on Thursday re-approved the package as well as the plan to reincorporate in Texas, where Tesla has its headquarters and some of its manufacturing facilities. The company filed paperwork to implement the change the same day.

By voting to leave the First State, shareholders could be ratifying the view among some that Delaware s shareholder protections have gone too far, some legal experts said. An alternative, however, is that Musk is simply so important that investors are willing to take a chance on Texas.

I do think that Elon Musk is this singular figure, said Renee Zaytsev, a corporate- and securities-law attorney at Boies Schiller Flexner. Is Tesla what other companies are looking to, to decide where they re going to incorporate or how they re going to run their governance? Probably not.

via www.wsj.com

Theo Francis