Elon Musk on a crusade against the state of Delaware

Elon Musk, on a crusade against the state of Delaware, is moving SpaceX headquarters

After Elon Musk lost $56 billion in compensation at Tesla according to a verdict, he launched a crusade against the American state of Delaware, where he has just withdrawn the headquarters of another of his companies, SpaceX.

The Delaware Chancery Court (DCC), one of the state's three constitutional courts specializing in business law, has been considered one of the pillars of American capitalism for more than a century, as it is the jurisdiction of nearly two-thirds of the country's 500 largest corporations.

According to this eastern US state, almost 80% of IPOs were registered on its territory, with companies relying on the expertise of its judges and the reliability and stability of its legal system.

But a recent DCC ruling against him has angered Mr. Musk, who sees the court as a haven for ultra-litigious lawyers and fussy judges who get in the way of his vision and strategic decisions.

A judge in late January ruled in favor of a shareholder in automaker Tesla who had asked to overturn a 2018 compensation plan worth an estimated $56 billion to boss Elon Musk.

“SpaceX has moved from Delaware to Texas,” Elon Musk announced Wednesday on X (formerly Twitter), the social network he bought, adding: “If your company is still registered in Delaware, I encourage you to do so quickly as possible.” .

“Well done”

As the first state to ratify the United States Constitution, Delaware and its courts have always played an integral role in American industry.

According to Omari Scott Simmons, a law professor at George Washington University, the DCC is “almost a government agency” that sets the rules for companies.

It is a pillar of entrepreneurship and one of the reference institutions for the internal functioning of American multinational companies.

“There is something very strange in the United States: when you start a company, you decide what laws apply and which court has jurisdiction to apply them,” says Simon Lorne, vice president and general counsel at Millenium Management.

“The only alternative would be legislation at the federal level, but I think that would be a mistake for the entire system. And Delaware has done a great job over the last 100 years,” he adds.

When it comes to governance and conflict resolution, the country's large companies adhere to the decisions of the DCC and its more than 100-year-old case law.

Another advantage from a business perspective: According to Omari Scott Simmons, judges in Delaware are not elected or appointed by political power, as in many American states, but are selected by non-partisan commissions that favor expertise.

And unlike a federal agency, its courses are protected from changes by the political majority.

What's more, unlike most other states, in Delaware there is no chance of standing in front of a jury: decisions are weighed and made exclusively by judges.

No Exit

Mr. Musk's anger led him to move SpaceX to Texas, one of the few states other than Nevada that wanted to build a legal system that could compete with Delaware.

Although it appears difficult to unseat the US East Coast state, some observers fear a race to the bottom as companies seek jurisdictions with less stringent corporate oversight.

Elon Musk also moved his startup, which produces Neuralink brain implants, to Nevada, where he already set up X's headquarters after the acquisition.

In any case, the companies are not listed and Mr. Musk has full control.

But in the case of publicly traded Tesla, the problems could prove far more complex, with only a small portion of shareholders opposed to the move needed to block it.

This happened with TripAdvisor, whose parent company CEO has so far failed to push through Delaware's exit due to opposition from some shareholders.

The DCC is also expected to decide on this issue this month.