6 ms·

SpaceX has moved its state of incorporation from Delaware to Texas

48 points by lopkeny12ko 3y ago

happytiger 3y ago
This is hugely important. What’s happened here is the first time I’ve seen a major corporation do this and the law was only changed to allow it to happen in 2022. Does this mean Delaware corporations are going to move in larger numbers? This could extract a lot of companies into other states and cause a real big split among corporations and their tax bases. It could cause states to start competing for this incorporation too.
- justapassenger 3y ago
  [dead]
- huytersd 3y ago
  States incorporate in Delaware for a reason. Isn’t Elon’s move just because his pay ask was rejected in Delaware? It wasn’t a move based on fundamentals. I don’t see why other companies would do this.
  - dreamcompiler 3y ago
    His Tesla pay ask was rejected. He wants to move Tesla too but that's going to be much tougher: Tesla is a public company and some of its shareholders will probably object and sue. SpaceX is a private company with many fewer investors who are presumed to be sophisticated, so they can pretty much do whatever they want with very little oversight. Moving Tesla will be much harder.
    - DoesntMatter22 3y ago
      It's not really going to be much harder. They are going to put it to a vote at the annual meeting and if the vote passes then they will move it.
      - f0e4c2f7 3y ago
        For context, Elon's comp was also put to a vote in an annual meeting, passed, a minor shareholder (9 shares) filed a lawsuit and here we are. In the case of Tesla in Delaware at least, the court did not optimize for shareholders wishes. This is what has Elon wanting to move out of Delaware as much as the comp.
    - cma 3y ago
      I wonder if Elon recused himself from the shareholder vote to move SpaceX since it was from personal stuff affecting him at another company?
    - grecy 3y ago
      > His Tesla pay ask was rejected It wasn’t an ask. It was a payout agreed to by the board and shareholders if and only if he added a trillion dollars of value to the company. He did that, and now a court denied the deal. If my company signed a deal where I would get an astronomical bonus for pulling off the impossible then reneged when I did it I would be pretty pissed.
      - TheCoelacanth 3y ago
        That's why you don't negotiate your pay package "against" someone who was also your personal lawyer. If it wasn't for massive conflicts of interest in the process of him getting that deal, it never would have been overturned.
- toomuchtodo 3y ago
  Companies and investors want stability and consistency. Elon moved SpaceX because he's upset about accountability and governance of corporate structures. It likely won't impact investment from "friends and family" or other individuals who don't mind the volatility for the potential returns and lack of liquidity if private Elon companies stay private to avoid said governance and accountability, but Fidelity might think twice at the next raise. Matt Levin's take is top notch as always: https://archive.today/XMmoF https://archive.today/XMmoF > Of course, this is the reason to incorporate in Delaware: Someone is keeping an eye on managers and boards of directors to make sure that they’re running the company in the best interests of all of the shareholders, not just those of the idiosyncratic controlling founders. You can raise capital from investors more easily, because the investors trust that there are rules to protect them, that they are not subject to the whims of self-interested entrepreneurs. > And yet there is something awkward about a judge second-guessing the CEO compensation decisions of the board of directors of a $600 billion company, even if, yes, it’s the board of Tesla. Musk wanted this pay package, Tesla’s board thought it was a good idea to give it to him, and a majority of Tesla’s shareholders voted to approve it. And then Musk did in fact create a trillion dollars of shareholder value, earning his big pay package and making the shareholders happy. Most of them. But one complained, and that’s enough for a judge to reverse the board’s decision. > This is not a Delaware thing, really, though it is possible that business courts in Texas or wherever might be more sympathetic to CEOs generally, or to Musk specifically. (Bloomberg reports that “Musk also asked X devotees Tuesday to vote on whether he should shift Tesla’s incorporation papers to Texas,” sure.) It is a public company thing: If you run a public company, not only do you have corporate-law fiduciary duties to your shareholders, but you also have genuinely outside shareholders, index funds and activists and gadflies and anyone else who wants to buy stock. If you run a private company, even one incorporated in Delaware (as, for instance, SpaceX is), you can have a lot of control over who your shareholders are, and you can run the company the way they want, which is usually also the way you want. If you run a public company, you have no control over who gets to be a shareholder, or what they can complain about, or what a court will make of their complaints. > You know what’s really awkward? A few weeks ago, even as this decision was pending, Musk was out publicly demanding another giant stock grant from Tesla’s board. The threat that was implicit in the 2018 pay deal — if the board didn’t shower Musk with options, he’d take his attention to SpaceX or elsewhere — is explicit today; Musk posted that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” and that “unless that is the case, I would prefer to build products outside of Tesla.”
- tzs 3y ago
  The law in question was one that required unanimous shareholder approval for moves. Now it just requires majority approval. I can find plenty of articles talking about the repeal of that law in 2022, but I haven't found one that tells me when it was enacted. Does anyone happen to know? In 1993 Microsoft moved from Delaware to Washington. Microsoft went public in 1986 and so I'm having a hard time imagining that they could have gotten unanimous shareholder approval for anything in 1993 and so infer that the unanimous requirement law came sometime after that.
ggm 3y ago
I never understood the freedom of incorporation issue here in the first place. Perhaps its some concept of "state independence" joined to "competition is good" but at one remove, differential standards in registration & incorporation feels like a bad thing, within an otherwise jurisdictionally consistent model. TL;DR this shouldn't be effective, if the regulatory landscape is flat. If it's not flat, then states differences are very possibly a bug, not a feature.
- SllX 3y ago
  It’s not flat, never has been, and you can measure by how many different legal jurisdictions (which cannot be measured by national borders alone) there are in the world how likely it is it ever will be. Let me put it this way: I don’t want Mississippi voters determining the laws of my State and Mississippi doesn’t want California voters determining the laws of Mississippi. When we do need to reach some kind of compromise, that’s what Congress is for, and you can measure what there’s room to compromise on by how much Congress gets done in a given session. That’s why we’re different. That’s sometimes inconvenient, but for most people most of the time those inconveniences never come up for them personally.
  - ggm 3y ago
    Contextually jurisdictional flatness meant USA. It's surprising to people in other federated states that these levels of business incorporating processes vary inside the sane polity. Reductionist "but the world is not flat" ignores how strange America is, French law Louisiana and all. Admittedly scots law is very different. I realise some other places have this but you don't hear of people moving a plc from London to Glasgow because of it.
    - SllX 3y ago
      Yeah, we’re a bunch of weirdos, but weird is not bad. There are good historical reasons for how we are, and not only has there not been a reason to proactively modify the status quo, even if we did, I suspect we would land on a similar arrangement as the present one, or choose to make no changes at all (which would then be called Congress being gridlocked, ineffective and inept by the hypothetical champions of any such reform).
ChrisArchitect 3y ago
[dupe] More discussion: https://news.ycombinator.com/item?id=39377824 https://news.ycombinator.com/item?id=39377824
londons_explore 3y ago
Does this meaningfully affect how many taxes the state government receives?
- viraptor 3y ago
  In 2022 their state tax paid was $9M https://edition.cnn.com/2022/02/10/investing/elon-musk-tesla-zero-tax-bill/index.html https://edition.cnn.com/2022/02/10/investing/elon-musk-tesla... Delaware collects ~$6B https://fred.stlouisfed.org/series/QTAXTOTALQTAXCAT3DENO https://fred.stlouisfed.org/series/QTAXTOTALQTAXCAT3DENO so that's a rounding error of a difference.
  - EduardoBautista 3y ago
    That is Tesla, not SpaceX.
    - viraptor 3y ago
      Correct. I can't find any info about SpaceX taxes. (It's not public so I don't think we'll know)
  - londons_explore 3y ago
    If Musks campaign is successful and half of companies move their incorporating state elsewhere, Delaware stands to lose $3B/year. That's $3000 per resident. That sounds like a lot for them to have to find from under the couch cushions.
    - viraptor 3y ago
      Why would half the companies move? There's a single company with the "government blocked CEO's billions" issue.
      - DoesntMatter22 3y ago
        Already a lot of companies have been moving after this. ALL THE vcs feom thr All In Pod said they are moving all thier companies out of Delaware. More will follow. The reality is Delaware decided to give the CEO no pay, and in turn hurt the shareholders by paying what is likely thr largest ever award to a law firm. And who pays for it? The shareholders when tesla has to pay them an enormous amount of money. All over 1 person who had 11 shares, granted they were a puppet
wkat4242 3y ago
One thing I find kind of hard to understand: How can someone who has so many billions already (as in, more than he can ever spend in ten lifetimes) care so much about getting so much more? He's already at the point that the concept of "money" is irrelevant to him. He can buy anything he wants anywhere at any moment without even thinking about the cost. I don't really understand the anger at not getting another 50 billion to add on top of the pile that is already so astronomically big :) What does he want to buy, another 1000 private jets? :) If I had this kind of money I would really not care anymore :P I do think it's unfair that the whole pay package was cancelled though. It should have just been negotiated to a more justifiable amount.
- vardump 3y ago
  It's about control of Tesla. Also Musk's publicly stated goal is to use his fortune to go to Mars.
  - wkat4242 3y ago
    > It's about control of Tesla. Ah ok I don't really have the head for that kind of high-level politics, thanks for the explanation (really!) > Also Musk's publicly stated goal is to use his fortune to go to Mars. I see, that certainly does require a good few billions... :) Makes sense. Though I could imagine that he won't go alone and he could make of the others going to pay for the trip.
    - vardump 3y ago
      I think his stated goal is to make humanity multiplanetary, not for him to go there personally. I genuinely hope he'll succeed with that.
  - mlindner 3y ago
    > Also Musk's publicly stated goal is to use his fortune to go to Mars. Not himself though... society in general.
- SilverBirch 3y ago

48 points by lopkeny12ko 3y ago

This is hugely important. What’s happened here is the first time I’ve seen a major corporation do this and the law was only changed to allow it to happen in 2022. Does this mean Delaware corporations are going to move in larger numbers? This could extract a lot of companies into other states and cause a real big split among corporations and their tax bases. It could cause states to start competing for this incorporation too.

justapassenger 3y ago
[dead]
huytersd 3y ago
States incorporate in Delaware for a reason. Isn’t Elon’s move just because his pay ask was rejected in Delaware? It wasn’t a move based on fundamentals. I don’t see why other companies would do this.
- dreamcompiler 3y ago
  His Tesla pay ask was rejected. He wants to move Tesla too but that's going to be much tougher: Tesla is a public company and some of its shareholders will probably object and sue. SpaceX is a private company with many fewer investors who are presumed to be sophisticated, so they can pretty much do whatever they want with very little oversight. Moving Tesla will be much harder.
  - DoesntMatter22 3y ago
    It's not really going to be much harder. They are going to put it to a vote at the annual meeting and if the vote passes then they will move it.
    - f0e4c2f7 3y ago
      For context, Elon's comp was also put to a vote in an annual meeting, passed, a minor shareholder (9 shares) filed a lawsuit and here we are. In the case of Tesla in Delaware at least, the court did not optimize for shareholders wishes. This is what has Elon wanting to move out of Delaware as much as the comp.
  - cma 3y ago
    I wonder if Elon recused himself from the shareholder vote to move SpaceX since it was from personal stuff affecting him at another company?
  - grecy 3y ago
    > His Tesla pay ask was rejected It wasn’t an ask. It was a payout agreed to by the board and shareholders if and only if he added a trillion dollars of value to the company. He did that, and now a court denied the deal. If my company signed a deal where I would get an astronomical bonus for pulling off the impossible then reneged when I did it I would be pretty pissed.
    - TheCoelacanth 3y ago
      That's why you don't negotiate your pay package "against" someone who was also your personal lawyer. If it wasn't for massive conflicts of interest in the process of him getting that deal, it never would have been overturned.
toomuchtodo 3y ago
Companies and investors want stability and consistency. Elon moved SpaceX because he's upset about accountability and governance of corporate structures. It likely won't impact investment from "friends and family" or other individuals who don't mind the volatility for the potential returns and lack of liquidity if private Elon companies stay private to avoid said governance and accountability, but Fidelity might think twice at the next raise. Matt Levin's take is top notch as always: https://archive.today/XMmoF https://archive.today/XMmoF > Of course, this is the reason to incorporate in Delaware: Someone is keeping an eye on managers and boards of directors to make sure that they’re running the company in the best interests of all of the shareholders, not just those of the idiosyncratic controlling founders. You can raise capital from investors more easily, because the investors trust that there are rules to protect them, that they are not subject to the whims of self-interested entrepreneurs. > And yet there is something awkward about a judge second-guessing the CEO compensation decisions of the board of directors of a $600 billion company, even if, yes, it’s the board of Tesla. Musk wanted this pay package, Tesla’s board thought it was a good idea to give it to him, and a majority of Tesla’s shareholders voted to approve it. And then Musk did in fact create a trillion dollars of shareholder value, earning his big pay package and making the shareholders happy. Most of them. But one complained, and that’s enough for a judge to reverse the board’s decision. > This is not a Delaware thing, really, though it is possible that business courts in Texas or wherever might be more sympathetic to CEOs generally, or to Musk specifically. (Bloomberg reports that “Musk also asked X devotees Tuesday to vote on whether he should shift Tesla’s incorporation papers to Texas,” sure.) It is a public company thing: If you run a public company, not only do you have corporate-law fiduciary duties to your shareholders, but you also have genuinely outside shareholders, index funds and activists and gadflies and anyone else who wants to buy stock. If you run a private company, even one incorporated in Delaware (as, for instance, SpaceX is), you can have a lot of control over who your shareholders are, and you can run the company the way they want, which is usually also the way you want. If you run a public company, you have no control over who gets to be a shareholder, or what they can complain about, or what a court will make of their complaints. > You know what’s really awkward? A few weeks ago, even as this decision was pending, Musk was out publicly demanding another giant stock grant from Tesla’s board. The threat that was implicit in the 2018 pay deal — if the board didn’t shower Musk with options, he’d take his attention to SpaceX or elsewhere — is explicit today; Musk posted that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” and that “unless that is the case, I would prefer to build products outside of Tesla.”
tzs 3y ago
The law in question was one that required unanimous shareholder approval for moves. Now it just requires majority approval. I can find plenty of articles talking about the repeal of that law in 2022, but I haven't found one that tells me when it was enacted. Does anyone happen to know? In 1993 Microsoft moved from Delaware to Washington. Microsoft went public in 1986 and so I'm having a hard time imagining that they could have gotten unanimous shareholder approval for anything in 1993 and so infer that the unanimous requirement law came sometime after that.

ggm 3y ago

I never understood the freedom of incorporation issue here in the first place. Perhaps its some concept of "state independence" joined to "competition is good" but at one remove, differential standards in registration & incorporation feels like a bad thing, within an otherwise jurisdictionally consistent model. TL;DR this shouldn't be effective, if the regulatory landscape is flat. If it's not flat, then states differences are very possibly a bug, not a feature.

SllX 3y ago
It’s not flat, never has been, and you can measure by how many different legal jurisdictions (which cannot be measured by national borders alone) there are in the world how likely it is it ever will be. Let me put it this way: I don’t want Mississippi voters determining the laws of my State and Mississippi doesn’t want California voters determining the laws of Mississippi. When we do need to reach some kind of compromise, that’s what Congress is for, and you can measure what there’s room to compromise on by how much Congress gets done in a given session. That’s why we’re different. That’s sometimes inconvenient, but for most people most of the time those inconveniences never come up for them personally.
- ggm 3y ago
  Contextually jurisdictional flatness meant USA. It's surprising to people in other federated states that these levels of business incorporating processes vary inside the sane polity. Reductionist "but the world is not flat" ignores how strange America is, French law Louisiana and all. Admittedly scots law is very different. I realise some other places have this but you don't hear of people moving a plc from London to Glasgow because of it.
  - SllX 3y ago
    Yeah, we’re a bunch of weirdos, but weird is not bad. There are good historical reasons for how we are, and not only has there not been a reason to proactively modify the status quo, even if we did, I suspect we would land on a similar arrangement as the present one, or choose to make no changes at all (which would then be called Congress being gridlocked, ineffective and inept by the hypothetical champions of any such reform).

ChrisArchitect 3y ago

[dupe] More discussion: https://news.ycombinator.com/item?id=39377824 https://news.ycombinator.com/item?id=39377824

londons_explore 3y ago

Does this meaningfully affect how many taxes the state government receives?

viraptor 3y ago
In 2022 their state tax paid was $9M https://edition.cnn.com/2022/02/10/investing/elon-musk-tesla-zero-tax-bill/index.html https://edition.cnn.com/2022/02/10/investing/elon-musk-tesla... Delaware collects ~$6B https://fred.stlouisfed.org/series/QTAXTOTALQTAXCAT3DENO https://fred.stlouisfed.org/series/QTAXTOTALQTAXCAT3DENO so that's a rounding error of a difference.
- EduardoBautista 3y ago
  That is Tesla, not SpaceX.
  - viraptor 3y ago
    Correct. I can't find any info about SpaceX taxes. (It's not public so I don't think we'll know)
- londons_explore 3y ago
  If Musks campaign is successful and half of companies move their incorporating state elsewhere, Delaware stands to lose $3B/year. That's $3000 per resident. That sounds like a lot for them to have to find from under the couch cushions.
  - viraptor 3y ago
    Why would half the companies move? There's a single company with the "government blocked CEO's billions" issue.
    - DoesntMatter22 3y ago
      Already a lot of companies have been moving after this. ALL THE vcs feom thr All In Pod said they are moving all thier companies out of Delaware. More will follow. The reality is Delaware decided to give the CEO no pay, and in turn hurt the shareholders by paying what is likely thr largest ever award to a law firm. And who pays for it? The shareholders when tesla has to pay them an enormous amount of money. All over 1 person who had 11 shares, granted they were a puppet

wkat4242 3y ago

One thing I find kind of hard to understand: How can someone who has so many billions already (as in, more than he can ever spend in ten lifetimes) care so much about getting so much more? He's already at the point that the concept of "money" is irrelevant to him. He can buy anything he wants anywhere at any moment without even thinking about the cost. I don't really understand the anger at not getting another 50 billion to add on top of the pile that is already so astronomically big :) What does he want to buy, another 1000 private jets? :) If I had this kind of money I would really not care anymore :P I do think it's unfair that the whole pay package was cancelled though. It should have just been negotiated to a more justifiable amount.

vardump 3y ago
It's about control of Tesla. Also Musk's publicly stated goal is to use his fortune to go to Mars.
- wkat4242 3y ago
  > It's about control of Tesla. Ah ok I don't really have the head for that kind of high-level politics, thanks for the explanation (really!) > Also Musk's publicly stated goal is to use his fortune to go to Mars. I see, that certainly does require a good few billions... :) Makes sense. Though I could imagine that he won't go alone and he could make of the others going to pay for the trip.
  - vardump 3y ago
    I think his stated goal is to make humanity multiplanetary, not for him to go there personally. I genuinely hope he'll succeed with that.
- mlindner 3y ago
  > Also Musk's publicly stated goal is to use his fortune to go to Mars. Not himself though... society in general.
SilverBirch 3y ago