Elon Musk moves SpaceX's state of registration to Texas from Delaware after East Coast state struck down his massive $56 billion pay package
- Elon Musk has announced he has moved the incorporation of his space exploration company Space X to Texas from Delaware
- The move comes weeks after a Delaware judge ruled the Tesla compensation package he received was deeply flawed and was ordered to pay it back
- The ruling stemmed from a lawsuit brought by a shareholder, who said Musk's ties with directors who negotiated the $56 billion package weren't disclosed
Elon Musk has moved the state of incorporation for his company SpaceX from Delaware to Texas, after a court in the former state struck down 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 moving to another state as soon as possible.'
The move comes after judge Kathaleen McCormick voided Musk's compensation package from the company, which helped make him the richest person in the world.
The ruling had stemmed from a lawsuit brought by a shareholder, who said Musk's ties with directors who negotiated the bumper package weren't disclosed.
The compensation packaged, worth $56 billion, helped make Musk one of the richest people in the world
Musk announced on Wednesday that the company had converted its registration state from Delaware to Texas
The Delaware ruling against Musk came more than five years after a shareholder lawsuit alleged a waste of corporate assets and unjust enrichment for Musk.
At issue was his 10-year compensation package, granted in 2018, which offered him 12 separate stock grants, each tied to its own performance goal, and each representing 1 percent of Tesla’s total outstanding shares.
Musk achieved all 12 goals, but was barred from selling any of the shares for at least five years per the agreement.
The shares in question will now be cancelled, but Musk had not exercised any of the options yet, meaning that his ownership stake in Tesla remains at 13 percent.
The plan had a $55.8 billion maximum value, and $2.6 billion fair value at the grant date, making it by far the largest CEO pay package in corporate 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 in her ruling found that the process leading to the board’s approval of his 2018 compensation package was 'deeply flawed' because of how close Musk was to some of its members.
McCormick in her ruling found that the process leading to the board’s approval of his 2018 compensation package was 'deeply flawed'
The move comes after judge Kathaleen McCormick voided Musk's compensation package from the company, which helped make him the richest person in the world
McCormick determined that Musk was effectively a controlling shareholder, with a 21.9 percent stake in the company, influential 'Superstar CEO' status, and deep ties to the directors charged with setting his compensation.
In light of those facts, McCormick found that Musk's pay package should have been subject to a more rigorous 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 with the persons tasked with negotiating on Tesla´s behalf.'
Musk hit back at the ruling, saying: 'Never incorporate your company in the state of Delaware.
Tesla is physically headquartered at the Austin, Texas Gigafactory, but incorporated in Delaware
'I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.'
The billionaire then went on to vow to hold a shareholder vote to transfer Tesla's state of incorporation to Texas.
Musk has slumped to second richest person in the world with an estimated worth by Forbes totaling $198.9 billion, some $17 billion behind Bernard Arnault.
The ruling is not the first time that 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 finally went through with the deal to buy the company.
Musk is expected to file for appeal to the Delaware State Supreme Court regarding his pay package.
If the ruling stands, he will lose his options but not any shares he previously held.
