Elon Musk shifts SpaceX's state of incorporation from Delaware to Texas following legal...

[midian182]

What just happened? SpaceX CEO Elon Musk says that the company has now changed its state of incorporation from Delaware to Texas. The move comes soon after a judge in Delaware voided Musk's $56 billion Tesla compensation package, leading to his X/Twitter post advising people never to incorporate companies in the state.

Musk's reputation for holding a grudge was evident after Delaware Judge Kathaleen St. J. McCormick in January agreed with Tesla shareholder Richard Tornetta's lawsuit that claimed Tesla breached its fiduciary duty by unjustly enriching its CEO to the tune of $56 billion. Musk is expected to file an appeal to the Delaware State Supreme Court.

Musk's first response to the ruling was an X post suggesting founders never incorporate companies in Delaware, opting for Nevada or Texas if "you prefer shareholders to decide matters."

The billionaire followed up with a poll asking if he should change Tesla's state of incorporation to Texas, home of the company's physical headquarters. After 1.1 million people participated, the final outcome was 87.1% in favor of the move. Musk later confirmed that Tesla would be immediately moving to hold a shareholder vote to transfer its state of incorporation to Texas.

Musk began the process of switching the incorporation of his brain-chip implant firm Neuralink from Delaware to Nevada last week. Now, SpaceX, which has its headquarters in Southern California, is joining the exodus from Delaware, which has long been a favored state of incorporation for many companies.

"SpaceX has moved its state of incorporation from Delaware to Texas!" Musk wrote in a post on X on Wednesday. "If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible."

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. pic.twitter.com/B7FLByL2dY

– Elon Musk (@elonmusk) February 15, 2024

Musk was moving companies out of Delaware even before the Tesla pay-package ruling. After he succeeded in his protracted battle to acquire Twitter in 2022, he moved its state of incorporation to Nevada. His recently revealed artificial intelligence company, xAI, was also incorporated in Nevada back in March last year.

Musk was recently voted the most-overrated CEO in a Fortune survey in which hundreds of CEOs were asked to rank their peers in terms of who is most overrated and who doesn't get enough credit. Musk took the unwanted title for the second year in a row, while Microsoft boss Satya Nadella was voted most underrated for the eighth year running.

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https://www.techspot.com/news/101893-elon-musk-shifts-spacex-state-incorporation-delaware-texas.html

 

[OortCloud]

Elon Musk continues to blow huge sums of money due to his childish petulance, and fragile, over-inflated ego.

 

[Bobbydpue]

If you take your company public you do, in fact, have to listen to shareholders.


From investopedia:
"The board of all publicly-traded companies in the United States must be comprised of both inside and outside representatives who are objective and proactive.

Directors must advocate for shareholders and monitor corporate management to ensure that the team promotes and maximizes shareholders' interests and value. A board made up entirely or primarily of management would clearly be hampered by conflicts of interest, and the preservation of shareholder value might not be a priority."

The conflict of interest is why the shareholder won the lawsuit, and it is why Elon is moving the company to Texas, however, the law should be just as valid in Texas as it is in Delaware. If he's purposefully moving the company to ensure the board of directors will give him that massive bonus the people on the board should be removed by resolution.

 

[yRaz]

People criticize Musk, but the board members agreed to the bonus if he made certain improvements to the company and he exceeded all of those targets. I guess they thought those targets were unobtainable when making the agreement? And if he did meet those unobtainable targets then I'd be mad, too.

I also don't know what the shareholders are so mad about, he would have been paid in stock options that Tesla would have provide through a buy back program. The buy back program would increase the share price because *surprise* someone is buying up 55 billion in Tesla stock.

 

[Bobbydpue]

People criticize Musk, but the board members agreed to the bonus if he made certain improvements to the company and he exceeded all of those targets.

The board shouldn't be offering more money than they've ever grossed to the CEO. Whatever agreement was made doesn't matter; they shouldn't be making agreements that significantly reduces the money shareholders make. The board of directors have a duty to look after the profits of the shareholders, which is exactly what the lawsuit was about. It's like you don't understand the term "fiduciary".

 

[Bobbydpue]

"After he succeeded in his protracted battle to acquire Twitter in 2022, he moved its state of incorporation to Nevada." That's some word smithing you did there to make Elon look better than he is.

Elon was forced to complete the acquisition. He came to Twitter with a price above their stock value and with due diligence waved to make the deal look too good to resist. Then Elon tried to get out of the deal he proposed. Then he badmouthed Twitter on Twitter causing a significant drop in their stock prices. He didn't succeed in doing something he was trying to do, he was forced to pay an outrageous amount of money, that he proposed, after he realize it was a bad idea, but only after the offer was signed by both parties and after giving up due diligence...on purpose. I'm sure he's made some great deals before, but buying Twitter just so he could run it how he wanted to, at a massive loss was not one of them.

I wonder if Twitter employees wake up every day wondering if this is the day they all get laid off.

 

[yRaz]

The board shouldn't be offering more money than they've ever grossed to the CEO. Whatever agreement was made doesn't matter; they shouldn't be making agreements that significantly reduces the money shareholders make. The board of directors have a duty to look after the profits of the shareholders, which is exactly what the lawsuit was about. It's like you don't understand the term "fiduciary".

The shareholders make more money by the increase in stock price that a $55 billion buy back creates. It's not like Tesla stock pays dividends so taking money out of company coffers would impact their payout. Wait until they buy back all 55 billion in stock, sell. Short sell it after all the purchasing is done and buy more on the way back down. It's very rare that you know the price action months or years in advanced. This is a stupid lawsuit and I'm going to lose a lot of money because if this.

I see tons of people complaining about Musk but I doubt any of them are actual share holders or trade on any regular basis. I don't care why a company is doing a buy back, I'm pissed that I'm missing out on an opportunity because you know essentially when the high and the low is so you make money in both directions. Although, considering how many people on techspot call crypto a ponzi or pyramid scheme I don't think their audience is very well educated in finance.

 

[yRaz]

"After he succeeded in his protracted battle to acquire Twitter in 2022, he moved its state of incorporation to Nevada." That's some word smithing you did there to make Elon look better than he is.

Elon was forced to complete the acquisition. He came to Twitter with a price above their stock value and with due diligence waved to make the deal look too good to resist. Then Elon tried to get out of the deal he proposed. Then he badmouthed Twitter on Twitter causing a significant drop in their stock prices. He didn't succeed in doing something he was trying to do, he was forced to pay an outrageous amount of money, that he proposed, after he realize it was a bad idea, but only after the offer was signed by both parties and after giving up due diligence...on purpose. I'm sure he's made some great deals before, but buying Twitter just so he could run it how he wanted to, at a massive loss was not one of them.

I wonder if Twitter employees wake up every day wondering if this is the day they all get laid off.

Twitter was using a strategy where they label debts as assets. When the numbers became scrutinized this was discovered and Elon backed out of the deal because Twitter was essentially lying about their finances but it's a trick that people use to defer taxes. This is why Twitter had to sue Elon and why their stock price dropped. Twitter manipulated the lawsuit and had it put in front of a judge that usually favors the company.

 

[Endymio]

I wonder if Twitter employees wake up every day wondering if this is the day they all get laid off.

Just the ones who illegally conspired with the FBI to censor true, but politically-damaging content.

 

[SoftFox]

Twitter was using a strategy where they label debts as assets. When the numbers became scrutinized this was discovered and Elon backed out of the deal because Twitter was essentially lying about their finances but it's a trick that people use to defer taxes. This is why Twitter had to sue Elon and why their stock price dropped. Twitter manipulated the lawsuit and had it put in front of a judge that usually favors the company.

That was entirely his fault though as Musk negotiated and signed the Twitter deal without carrying out enough financial due diligence. Caveat Emptor

This is no different to you buying a car just based on photo and complaining about a problem with the engine

 

[wiyosaya]

Ah, Musk thinks he can avoid responsibility by taking his ball and going to another playing field.

 

[Homerlovesbeer]

Ah, Musk thinks he can avoid responsibility by taking his ball and going to another playing field.

It's clear you have NFI what's actually going on and are simply part of the "me too" Musk hate movement.

 

[Endymio]

Musk negotiated and signed the Twitter deal without carrying out enough financial due diligence.

A due diligence waiver doesn't cover financial fraud, nor intentionally false statements by management.

And those criticizing Musk for losing money in Twitter forget that from the start Musk stated his purchase of Twitter wasn't a financial investment, but rather about the importance of an open public forum. Since Bezos bought WaPo, he's proportionally lost more of his investment than Musk did on Twitter, yet you don't see the Leftist bobbleheads jeering him in public forums. Why not? Because the media hasn't yet told them what opinion they're supposed to have.

 

[Ecurb]

Microsoft creates nothing new, just keeps pumping cash from their robber baron (Bill) obtained land holdings (similar to Comcast, etc.). Musk makes a difference, adds real value, improves the world even when he overpays or is overpaid ;-).

 

[yRaz]

That was entirely his fault though as Musk negotiated and signed the Twitter deal without carrying out enough financial due diligence. Caveat Emptor

This is no different to you buying a car just based on photo and complaining about a problem with the engine

He backed out after their financial games were found out. His "criticism" on Twitter was about said lies of their financial situation and backed out because of it. So the lawsuit was originally in Delaware(for the Twitter lawsuit) but Twitter had the suit moved to a judge in California and cited "using the platform to spread hate speech" as a reason that Elon had to buy the platform. the California judge sided with Twitter and ordered Musk to buy it.

So now Twitter is sueing the state of California for the hate speech verdict. But do you know what the hate speech verdict is based on? California is basing the hate speech verdict on a post Musk made of him posting a picture of the Bat Signal.

That is 100% not a lie or an exaggeration. Twitter knew they were losing the lawsuit so the moved it to California. After moving it to California, CA sided with Twitter, declared the Bat symbol as hate speech and made Musk buy Twitter for $44billion.

 

[Bobbydpue]

I see tons of people complaining about Musk but I doubt any of them are actual share holders or trade on any regular basis.

This article was about a shareholder suing the board of directors.

 

[Bobbydpue]

He backed out after their financial games were found out. His "criticism" on Twitter was about said lies of their financial situation and backed out because of it. So the lawsuit was originally in Delaware(for the Twitter lawsuit) but Twitter had the suit moved to a judge in California and cited "using the platform to spread hate speech" as a reason that Elon had to buy the platform. the California judge sided with Twitter and ordered Musk to buy it.

You should collect data before forming an opinion. In Elon's proposal to Twitter not only did he offer them a price well above their current stock price, but he also waved due diligence. "after their finacial games were found out" is false because he waved due diligence. Due diligence is where a potential buyer collects data from the company they are acquiring to determine if the company will continue to be as successful as their historical data shows and Elon's deal, the one he proposed, waved due diligence to make the deal too good to turn down. The entire situation was all his fault.

From Bracken Group:

"As Judge Kathleen St. J. McCormick remarked during court proceedings in Chancery Court in Delaware, "We don't know what would have happened in diligence because there wasn't any due diligence, right?""

Further from Bracken:

"Due diligence is an essential part of a successful commercial transaction in any industry. While the scope, duration, and topics of importance may vary, it enables companies to assess the value of a business and confirm all relevant information before deciding to proceed with the transaction.

Musk should have carried out due diligence to decide if he wanted to buy Twitter, rather than after signing an agreement to acquire the company. At the point where the issue of bots and spam accounts arose, Musk had already signed an agreement and the due diligence process was over."

The issues with the acquisition were all Elon's fault.

 

[Bobbydpue]

Twitter knew they were losing the lawsuit so the moved it to California. After moving it to California, CA sided with Twitter, declared the Bat symbol as hate speech and made Musk buy Twitter for $44billion.

That post was full of made-up "facts". The entire Twitter Aquisition trial was held in Delaware and had nothing to do with California, furthermore, the "bat signal" wasn't an actual bat symbol it was a metaphor for encouraging people and speech previously banned from Twitter to come back to the platform. You should look up why Delaware was chosen for the acquisition trial.

Elon was forced to go through with the unsolicited offer he made with Twitter in October 2022 and the California hate speech litigation was around April of 2023 and were all based on the changes Elon had made to the platform.

Post-Elon Twitter sued the Center for Countering Digital Hate and Anti-Defamation League around April 2023. He blamed them for loss of advertising revenue. Around Dec of 2023, he told advertisers to go "F" themselves. That, further, reduced the number of advertisers on the platform.

Again, all of this is Elon's fault. He really doesn't care about Twitter he bought it just so he could things his way.

 

[yRaz]

You should collect data before forming an opinion. In Elon's proposal to Twitter not only did he offer them a price well above their current stock price, but he also waved due diligence. "after their finacial games were found out" is false because he waved due diligence. Due diligence is where a potential buyer collects data from the company they are acquiring to determine if the company will continue to be as successful as their historical data shows and Elon's deal, the one he proposed, waved due diligence to make the deal too good to turn down. The entire situation was all his fault.

From Bracken Group:

"As Judge Kathleen St. J. McCormick remarked during court proceedings in Chancery Court in Delaware, "We don't know what would have happened in diligence because there wasn't any due diligence, right?""

Further from Bracken:

"Due diligence is an essential part of a successful commercial transaction in any industry. While the scope, duration, and topics of importance may vary, it enables companies to assess the value of a business and confirm all relevant information before deciding to proceed with the transaction.

Musk should have carried out due diligence to decide if he wanted to buy Twitter, rather than after signing an agreement to acquire the company. At the point where the issue of bots and spam accounts arose, Musk had already signed an agreement and the due diligence process was over."

The issues with the acquisition were all Elon's fault.

Well considering that the defining factor in the case was a bat symbol and had nothing to do with due diligence I'm going to side with Elon on this one.

Post-Elon Twitter sued the Center for Countering Digital Hate and Anti-Defamation League around April 2023. He blamed them for loss of advertising revenue. Around Dec of 2023, he told advertisers to go "F" themselves. That, further, reduced the number of advertisers on the platform.

He told disney specifically to go **** themselves after they said they would pull their streaming from Teslas if Elon didn't do more to to censor hate speech on Twitter involving trans people

 

[Endymio]

This article was about a shareholder suing the board of directors.

The suit was by a "thrash metal drummer" named Richard Tornetta, who owned les than 0.0001% of Tesla's stock.

In Elon's proposal to Twitter not only did he offer them a price well above their current stock price...

Every corporate buyout offer in world history has been above the current stock price. How could it be otherwise? Who would sell their shares privately for less than they could get on the open market?

... but he also waved due diligence

You're quite confused over the legal significance of this. The original purchase agreement contains warranties that the statements made by Twitter in SEC filings were materially correct. Three days after signing the merger agreement, Twitter suddenly revises their user figures for the last several years, showing they had double-counted a large number of users. Problem 1.

Problem 2. Another statement to the SEC -- made repeatedly for years -- was that Twitter had a methodology to determine that their "spambot" problem involved less than 5% of accounts. Per the purchase agreement, Twitter was obligated to provide data to Musk to support this statement. They refused for months. When Musk threatened to cancel the deal, they revealed they selected 100 accounts ((less than 0.00005% of daily users) and then applied some never-identified "standard" to judge whether they were bots or not. The sample size and lack of formal methodology were clearly far below any reasonable standard.

If any member of Twitter's management team did any of the above intentionally or willfully, to make the company appear better than it actually was -- the deal is defunct. Period. If these issues were all purely coincidental and inadvertent, then a due diligence clause would have allowed termination regardless. That's the only difference. Did Twitter lie intentionally or accidentally? If the former, Musk had every legal right to terminate.

 

[SoftFox]

You're quite confused over the legal significance of this. The original purchase agreement contains warranties that the statements made by Twitter in SEC filings were materially correct. Three days after signing the merger agreement, Twitter suddenly revises their user figures for the last several years, showing they had double-counted a large number of users. Problem 1.

Problem 2. Another statement to the SEC -- made repeatedly for years -- was that Twitter had a methodology to determine that their "spambot" problem involved less than 5% of accounts. Per the purchase agreement, Twitter was obligated to provide data to Musk to support this statement. They refused for months. When Musk threatened to cancel the deal, they revealed they selected 100 accounts ((less than 0.00005% of daily users) and then applied some never-identified "standard" to judge whether they were bots or not. The sample size and lack of formal methodology were clearly far below any reasonable standard.

If any member of Twitter's management team did any of the above intentionally or willfully, to make the company appear better than it actually was -- the deal is defunct. Period. If these issues were all purely coincidental and inadvertent, then a due diligence clause would have allowed termination regardless. That's the only difference. Did Twitter lie intentionally or accidentally? If the former, Musk had every legal right to terminate.

You just written two paragraphs explaining why companies carry out due diligence.
They don’t go through this tortuous process just for the lawyers’ fees. It’s basically for Twitter to open the books an allow Musk to go through their financial records and find any irregularities or discrepancies.

For the User and Bots numbers Musk again has lost this argument. He openly stated before the merger proposal he didn’t believe Twitters numbers and publicly said so. It was one of the reasons he (ironically) tweeted was for buying the company and remove the bots. He was therefore fully aware of any potential discrepancies between Twitters and his viewpoints. He therefore can’t back out after signing deal saying he wants additional bot data. This is what the due diligence period is for, and he waived it.

Finally, even if he didn’t believe the Twitters bot numbers, that is not in itself enough to claim fraud as he would have to prove that higher Bot numbers had a ‘material effect’ on Twitters finances and would have an impact on the merger which would be very difficult to prove.

I find it interesting all these arguments from armchair lawyers, however if you google actual scholarly/lawyer articles on the musk-twitter lawsuit they overwhelmingly suggest that Musk had a very weak case based on actual company contract law and was unlikely to succeed. This is the reason why in the end gave up he as he had nowhere to go except complete the take-over.

 

[DaveBG]

So basically a corrupt "judje" 5 years later had the power to overturn shareholders vote of so many people? Are we in russia or north korea? How can this be legal???

 

[Endymio]

You just written two paragraphs explaining why companies carry out due diligence.

Um, no. I'm not sure how much simpler I can explain it. If a company's management is willing to give fraudulent data and statements to the SEC, they're likely willing to do the same in the due diligence phase of a buyout. This is why acts of intentional misrepresentation lie outside the bounds of due diligence, and also why many such post-merger and post-buyout lawsuits have been successful, due diligence or not.

For the User and Bots numbers Musk again has lost this argument. He openly stated before the merger proposal he didn’t believe Twitters numbers and publicly said so

Irrelevant. He wasn't the one certifying that data to the SEC.

even if he didn’t believe the Twitters bot numbers, that is not in itself enough to claim fraud as he would have to prove that higher Bot numbers had a ‘material effect’ on Twitters finances

Eh? The SOLE source of Twitter's income is advertising based 100% on their mDAU figures. If those figures are inflated by 20% or more, then Twitter's income -- and net worth -- must be adjusted appropriately.

 

[SoftFox]

Um, no. I'm not sure how much simpler I can explain it. If a company's management is willing to give fraudulent data and statements to the SEC, they're likely willing to do the same in the due diligence phase of a buyout. This is why acts of intentional misrepresentation lie outside the bounds of due diligence, and also why many such post-merger and post-buyout lawsuits have been successful, due diligence or not.

There is no evidence yet found that Twitter gave ‘Fraudulent’ Data (See below SEC Filing comments on BOT Data variation).

To continue the suggestion that they are willing to suppress or present false data even during due diligence is another step up entirely and on the Enron scale of willful intentional deception.

In any case to above you are now simply giving ‘what if’ hypothetical comments as Musk declined due diligence and basically lost or reduced his case of backing out from that point going forward.

Irrelevant. He wasn't the one certifying that data to the SEC.

No, It’s not irrelevant. To be fraud Musk must prove that he took Twitters 5% BOT figure as genuine and in good faith agreed to buy the company, then find out afterwards that they were in fact not true.

Musk however has numerous times stated he didn’t believe Twitter and the figures were far higher and one of the reasons he bought the company. This point is important, and you seem to disregard it, it reduces his argument of walking in blind to any prospective material financial changes. He would need to prove then that Twitter during the takeover phase inflated the number of genuine users (or depress the number of BOT numbers).

As Twitter had been using these BOT estimates for some considerable time in public prior to the take over this would a very difficult task and a high bar.

Secondly have you read the SEC filings? They contain very little info on Spam/BOT however they contain the following comments.

‘We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the fourth quarter of 2021 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated.

That gives Twitter sufficient vagueness and allowance in variation of the fake/spam/bot figures to suggest it could be higher in any SEC Filings.

IT IS AT THIS POINT THAT MUSK SHOULD HAVE ASKED FOR DUE DILIGENCE (Capitals for Emphasis)

If so, he would have access to Twitter confidential financial and user data information where he could have arrived at his own BOT numbers. He could then legally re-negotiate the deal. For some inexplicable reason however, he declined and went straight to a formal offer

Eh? The SOLE source of Twitter's income is advertising based 100% on their mDAU figures. If those figures are inflated by 20% or more, then Twitter's income -- and net worth -- must be adjusted appropriately.

The mDAU figures are subjective as per above depending how they are estimated and arrived at, the advertising revenue is not also 100% based on the accuracy of the figures.

An advertiser pays what is wants or negotiates to pay Twitter. It obviously has some bearing in negotiations but ultimately, it’s just an estimation and up to the advertiser to decide if it’s accurate and worth the cost.

This is no different to other social media companies. Facebook/Meta has been accused for years of over inflating its users base depending how you calculate or eliminate fake/dormant/spam/bots etc.

 

[Endymio]

There is no evidence yet found that Twitter gave ‘Fraudulent’ Data

On the contrary, I've given substantial evidence. Why restate years of mDAU figures immediately after accepting Musk's offer, unless they knew the data was wrong? Where was the algorithm and methodology to "confidently assert" that bot traffic was less than 5% of the total? It didn't exist. Twitter themselves publicly stated that, "to calculate how many accounts are malicious spam, we review thousands of accounts sampled at random..." In reality, they sampled 100 per day -- and rather than doing so randomly, they specifically ignored those accounts most likely to be bots.

In any case, you've misunderstood my argument. It's not that Twitter definitely committed fraud. It's that, fraud or not, no due diligence clause would have helped. Due diligence is about verifying objective figures, not subjective opinions. Any clause to allow Musk's team to cancel the deal if their own subjective evaluation of bot traffic disagreed with Twitter's would have been so general as to constitute what's called an "escape clause", which would have transmuted the offer into a non-binding letter of intent. The problem is that people read some gaslighting click-bait headline on the Internet ("Musk waived due diligence! What a bone-headed move!") and swallow it whole.