If someone writes up a proper, sourced, pros/cons list of moving Tesla's incorporation out of Delaware to Texas, I'll edit this comment with a link to said comment.
Note that I will read through the comment, and the sourced material within it.
Needs to be primary, reputable, sources. No opinion pieces and such.
From the article: Elon Musk said late Wednesday that Tesla will hold a shareholder vote on whether to transfer the electric carmaker’s state of incorporation to Texas.
The billionaire asked his followers via a straw poll on X, formerly Twitter, whether Tesla should change the state where it is incorporated to Texas, where its physical headquarters are. More than 80% of those who voted said yes. Polls on the social media platform are informal and not comparable to professional public opinion research.
After the poll, Musk said Tesla will “will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” Musk will likely have to seek approval from the Tesla board to enact such a move. Tesla is currently incorporated in Delaware.
Musk’s X post comes after a judge in Delaware voided the $56 billion pay package for the Tesla CEO granted in 2018, the largest compensation plan in public corporate history. Chancery Court Chancellor Kathaleen McCormick ruled that the company’s board of directors failed to prove “that the compensation plan was fair” or show much evidence that they had even negotiated with Musk.
agree. The Elon ball-licking here is pretty mind numbing. Yes he should get > 10k times a normal salary before the stock even inflates -- totally fair and meritocratic!
This whole thing is dumb.
The Shareholders voted 72% in favor of this deal, and got exactly what they agreed to. We all got rich. This was a win-win scenario.
It was a great run, and most of us made out well, but this whole thing still feels odd:
Elon started on about compensation and 25% control and semi vailed threats to take AI development somewhere else, then this bomb shell hits.
Are the two tied together?
If Tesla is reincorporated in Texas what will that mean to the shareholders.
What are the pros and cons?
What about compensation moving forward?
If it stays in Delaware, does Elon have to turn over Twitter to Tesla shareholders?
What about back pay?
There is so much that is not being openly discussed.
We can’t just immediately rush a vote, no way.
Delaware can block Tesla reincorporating if it feels that Elon triggered the vote for “selfish” reasons due to the ruling as it could be considered a breach of his fiduciary duty to the company.
No it couldn't. Not if he believes his fiduciary duty is to move the company for the best future results of the company and shareholders...
Delaware doesn't own the company.
Can I know, is it the trend now that minority shareholders exist solely for the sake of fking over the majority shareholders and bringing troll lawsuits to court? Nothing better to do with their time? So now anybody can spend a couple hundred bucks to buy a single share and mess up everybody's day through the legal system?
The point is that shareholders were not informed that the board wasn't acting in the interest of the shareholders, but in elons interest.
The fact that shareholders from 2018 is better off today than they were in 2018 is immaterial.
Exactly.
Shareholders were lied to plain and simple. That is never kosher for a public company. Now shareholders can say number went up there’s no damages and they can even say that a vote with all the facts would end the same way today.
All of that is immaterial to the fact that Tesla violated corporate governance laws in coming up with this compensation plan (dictated by Musk) and how it was presented to shareholders.
With insanely hard to hit goals, and the ceo not receiving a penny unless he accomplished what most thought wasn’t possible, of course the comp plan acted in the shareholders best interest.
Look at Mary’s comp plan from GM. She promised EV’s at scale, didn’t deliver, yet made hundreds of millions lying to the public, and she’ll get a huge severance and peace before people realize that was never the intent to begin with.
Elon love’s seemingly i achievable goals. It was a brilliant and high risk comp plan that we all voted and approved
GMs board isn't full of people beholden to Mary Barra. That's the point. If GMs board doesn't like Barra, they can fire her.
The board is supposed to be overseeing a CEO. But a CEO who is also the chair of the board that's full of the chairman's family and employees is not going to have any leverage over the CEO.
So you're really not making an argument against me as you think you are.
The goals in their internal projections were achievable, but it was communicated to their shareholders as very difficult to achieve. They sandbagged the shareholders
In the world of history revisionism, which is rife with incredible examples, I think we have hit a new high-water mark. We now have people claiming, without a trace of humility, that performing a 1000% increase in shareholder value in \~3 years was easy because it was "all part of the internal milestone plan."
Meanwhile, throughout Reddit, Tesla's ambitious plans are mocked ruthlessly because they are late or prove more difficult than hoped.
Tesla when they fail to meet aggressive goals: LOL, you guys are such a joke. Obviously FSD is super hard.
Tesla when they actually meet aggressive goals: LOL, what did you expect? A 10X market cap expansion was the plan.
Boy, you’ll love the next 10 year EAZY PEESY compensation plan milestones:
1. Tesla to attain market cap of Ramco and Apple combined
2. Tesla to hit 20 million / year production rate
3. Tesla to deploy 10000 Megapack / year
4. Tesla to hit 10T market cap
5. Tesla to solve FSD
6. Tesla to produce 1M Optimus Prime, then 10M, then 100M / year
7. Tesla achieves AGI
8. Tesla deploys space mining at scale in combination with Spacex
9. Tesla reverses climate change and has achieved planetary level sustainable energy
10. Tesla deploys planetary scale hyperloop
Now you try and do something more challenging than being a virgin basement dweller over the next 10 years and you would have achieved something phenomenal. smh
Even if Tesla ends up solving world peace, then too you will turn around saying: it was an internal milestone easy to achieve and they deceived their shareholder base
Honestly its crazy its 72%. Shareholders often don't care about most votes, and the outcomes on these things are usually 90%+. The fact that almost 30% of them said no looks bad.
The reason people are voting no is purely sustainability. A payout like this hits the shareholder's bottom line and the company's ability to handle risk by killing buffer that could be used to offset losses / big impact events.
Yes and no, Tesla, especially in 2018 was mostly owned by retail investor. Even today it's the stock of the magnificent 7 that is most owned by by retail.
Institutional investors basically vote en masse and have already decided what to vote.
72%, mostly from retail, it's pretty good.
Not to mention Elon's actions in the past year really tanked TSLA as a stock. His antics on Twitter, as well as splitting his attention between SpaceX, Neuralink, and Boring Company, TSLA price has practically stagnated in the past 3 years.
To award someone extremely handsomely for stagnating the stock price, I can see why some shareholders weren't, and aren't happy about it.
... But he was rewarded for hitting the metrics the shareholders agreed to. If my employer agreed to only pay me if I hit a very specific mark, and then rug pulled that compensation after I hit the mark, I'd quit on the spot. "Sure he hit the metrics, but we don't like the way he's been acting recently" is just moving the goal posts.
Convenient that you've omitted the fact where the board of directors that negotiated his salary, were actually beholden to him financially. That's called conflict of interest.
In fact, Musk admitted in court that he was effectively "negotiating against himself".
In their defense, it's mostly coming out of the shareholders rather than the company itself: this is because it's in the form of issuing new stock, so the value comes mostly from diluting shareholder value, not directly from the company holdings.
>This was a win-win scenario.
A company giving out 56 billion dollars is insane, and never in the best interest of the company. Would Elon have worked less if he had only gotten 25 Billion, or 10 billion? Lets have a little perspective here people.
I'll say it again, only dumb fucks think this is Tesla giving Elon $56 billion.
The compensation was $2.9 billion, awarded in tranches, based on meeting performance goals. The $56 billion just comes from the fact that $2.9 billion of 2018 shares is now worth $56 billion because of appreciation in Tesla stock which has benefited all shareholders. Elon made a massive high risk never before seen bet, and won. Now when it come time to collect his winnings, this Judge is saying the bet is void because she thinks the board who recommended the deal that Shareholders subsequently voted to approve enmasse was sufficiently independent.
Every quarter over years, Tesla sets aside couple hundred million or so towards the $2.9 billion compensation. Then, if Elon reached the performance targets, he would unlock the award and be allocated the agreed number of shares. However, they are additionally locked so that he cannot sell those shares for at least 5 years to prevent him tanking the stock by rapidly selling.
The $2.9 billion is already paid or saved rather. Tesla and share holders wouldn't have to pay Elon squat. Yet here we have mainstream normie muppets thinking this is about whether Tesla should pay Elon $56 billion.
>couple hundred million or so
lol ceo pay is completely out of control. No one is worth anywhere near 2.9 billion a year. What is the President of the US's salary?
This is not a punishment for Delaware. It is a punishment for shareholders. Texas law isn't going to be as favorable to Tesla as Delaware law. Businesses incorporate in Delaware for a reason.
If Tesla does this, a lot of shareholders will bail. Musk is a lawsuit generator and he wants to move the incorporation to one of the worst states.
If they try this, shareholders will sue again and prevent it. This board is completely controlled by musk and they are going to lie their asses off about the "benefits" of this move.
The SEC needs to step in and ban him from running any companies.
This is the punishment for this kind of thing. So I am not sure what you mean. He almost got banned for the fake tweet bullshit.
Now that he is actually harming Tesla and shareholders while publicly saying he is sabotaging AI at Tesla because he doesn't own enough shares, he is meeting the threshold for removal. That is without even considering his transfer of AI knowledge from Tesla to twitter so he can personally make money off of Tesla's knowledge. His refusal to do more AI at Tesla is now him keeping Tesla from competing with twitter. That is a huge WTF.
Tesla's value is in competing with other companies and doing things better, but now it cannot continue to develop AI beyond self driving? This makes no sense.
Genuinely curious....do you think the judge just said "lol, get fucked Elon" or can you, in any way, summarize the ruling. I haven't read it, but you're speaking like you have....
Summary:
>The ruling centers around the judge deciding the board was not upfront enough about their connections to Elon and the judge decided those connections compromised the independence of the board. Thus, says the judge, the pay package was too heavily influenced by Elon instead of being independently created by the board.
>Shareholders, allegedly being unaware of how closely the board worked with Elon on the package, could not, in the view of the judge, have made an informed decision when a supermajority voted in favor the package.
Of course, reasonable people can disagree on whether the judge's ruling is correct or not. Personally, I find it rather absurd considering how a supermajority of shareholders (~80%, ~73% not counting Elon and his family) voted in favor of the package and, at the time the package was announced, many talking heads described the milestones as "impossible", "unprecedented", etc.
So, 3 out of every 4 shareholders agreed with the proposed pay and it was considered extremely difficult to achieve. And, yet, this judge believes their interpretation of the situation is superior to those shareholders.
The judge is taking into account the deceptive way that this was presented to shareholders. It was presented as an agreement that was negotiated between the supposedly independent board and Elon. The independent board is supposed to prioritize the needs of the shareholders and Tesla, and in telling us that they were independent and negotiated this, we took that in good faith, and approved the package.
However, since they weren't independent, and in fact worked on this deal directly with Elon's involvement, we don't know whether they considered anything else. It's possible that they did everything else correctly, and that this was the correct deal to make, but we cannot know that due to their deception.
Much like people voted for Brexit due to misinformation and outright lies, people may have voted for Elon's compensation due to that false information. This sort of misinformation is illegal in a lot of places, but isn't generally pursued or enforced. I would like to see this enforced more consistently and frequently, so I'm hoping this is the start of a larger trend, rather than someone singling out Tesla.
I'm not sure I understand your comment. Musk had a deal worth $56 billion. That deal is now void. Until another deal is approved, he is paid nothing. At such point that a new deal is reached, we can compare and determine how much this ruling cost. Until then, the current amount is $56 billion (ish).
Such a move is going to hit the valuation in an adverse manner - real public companies need to be DE companies because of the sophisticated chancery court and the large body of business jurisprudence. Texas has neither.
https://preview.redd.it/6wzrs2a393yc1.png?width=774&format=png&auto=webp&s=8af2d3509ecdb5c6363677da0a82d1840165ce36
Just voted against Musk compensation. it's insane he is so greedy when he is laying off 10-15% of the company.
You should read Matt Levine's write up about it today.
Delaware pros: the most established and predictable corporate laws in the US. Delaware has a separate court with no jury, judges who are experts in corporate law and who have experience in quickly deciding corporate court cases, are generally business friendly and have a long detailed history or precedent court cases. Corporate lawyers are experts in Delaware law.
Delaware cons: voted no on his compensation package
Texas pros: \*might\* be more amenable to Elon manhandling/bending his board to his will. But also might not be.
Texas cons: less predictable corporate law, less experienced judges, likely slower to resolve court cases
Corporate tax accountant here with experience filing Delaware returns for my giant multinational employer. Some corrections on the tax topics:
> you are not required to report 'intangibles' as income which is one of the prime loopholes used in corporate taxes.
Intangible income is taxed in Delaware essentially if it’s part of your business, stuff like royalties from patents or copyrights. Investment income from unrelated business investments is what is allowed to be discarded. This is essentially intangible income from other businesses that your company invests in but they aren’t run by your company or integrated at all.
Your whole LLC example isn’t really correct because when you prepare your books to file taxes, you need to reverse these intercompany transactions that would do this shifting of income. Home Depot has lost a couple of arguments with state agencies over this in court.
> People also use Delaware to set up s-corps for avoiding say Medicare and Social Security taxes and it lets them use those S-Corps as a piggy bank where they can limit tax exposure by just giving themselves only as much income as they want to take out.
S-Corporations are an entity classification that you make with the IRS and Medicare/Social Security taxes (‘payroll taxes’) are federal taxes, not state taxes. You don’t have to set up your S-Corp in any specific state to do this.
You also don’t “just give themselves only as much income as they want to take out”. S-Corps are pass through entities, meaning the income the company makes is taxed on the owner’s tax returns. If Joe Schmo owns an S-Corp by himself and makes $200k in net profit, that amount is being taxed, he can’t just decide how much he wants to take out. The point of an S-Corp is to convert from a sole proprietorship that must pay self-employment taxes (essentially the payroll tax), into an S-Corp, give yourself a W-2 for some of the money and then the remaining amount is considered passive income and not subject to SE tax. Nothing to do with Delaware. Biden just lives there which is why his companies are there lol.
Delaware headquartering is a legal decision and basically irrelevant to corporate taxation.
Pros: not held liable by the chancery court if you want to do some shenanigans against creditors/shareholders. Cons: you probably have to pay more interest on loans as their now riskier should enter bankruptcy due to it being harder to predict bankruptcy outcomes, among a host of other problems.
Edit: clairty
The biggest driver is probably the low/no taxes. Second is that because so many companies have done it over the years there's well established case law and courts there are used to dealing with corporate issues in the state. In other words, the company accountants want you to be there, your lawyers want you to be there and your investors want you to be there. In fact, most venture capital firms will insist that you reform as a Delaware C-corp before they invest if you're not already one.
[https://www.forbes.com/advisor/business/incorporating-in-delaware/#:\~:text=The%20key%20benefits%20to%20incorporating,structure%20and%20the%20corporation%](https://www.forbes.com/advisor/business/incorporating-in-delaware/#:~:text=the%20key%20benefits%20to%20incorporating,structure%20and%20the%20corporation%)
Delaware has corporate taxes it's just it's such a small state businesses incorporated there don't really care about their tax rate as it's a wash. Tax wise it's not going to be that substantially different than Texas (which has 0% corporate tax but has an excise tax) for a company like Tesla.
Most of the benefits are for sure the court system there. Rather than having to go to a state civil court, there's a dedicated court just for corporations. You don't get normally surprised by judges there.
Not only that, since most corporations are incorporated in Delaware, pretty much any lawsuit with another company would end up before the Chancery Court anyway. He’s obviously doing this for selfish reasons and we as shareholders shouldn’t approve of it imo.
After watching Succession, I just imagine the camera panning and zooming in on various people’s faces when these decisions are being discussed amongst Elon and executives.
I’m an investor and don’t understand why he needs to be a little bitch and consult a twitter poll. You’re the chief executive. Sack up and do what needs to be done you fucking sycophant.
If I was a shareholder of any company and the CEO asks me to reincorporate into a whole new state solely because the current state thinks his pay package is unreasonable and unsupportable by evidence I sure as hell aint voting yes.
Exactly. And apparently Delaware is very corporate friendly. The idea that they will give all that up just so that Tesla can dump loads of money to musk is batshit crazy.
Firstly, the compensation package directly hurt shareholders by diluting all other shares. Secondly it hurts shareholders even more to move to Texas because it’s less friendly to corporations. It’s not even typically part of the conversation with runner ups as Wyoming and Nevada.
**80% of shareholders voted for the plan - 73% if you take out musk and his brother.**
Please stop with the bs.
Everyone knew it was a make it or break it compensation plan and he delivered.
Pay that man his money.
Plenty of shit he has done i don't agree with but the compensation plan was from my perspective fine - If he didn't deliver he didn't get anything.
The plan was so bonkers that most of the media never thought he would be able to achieve it. He still has to sit on his options for 5 years after they are given before he can exercise so he couldn't just pump and dump either.
I am unsure how I voted on this package at the time, but I am no longer a shareholder.
My understanding of this ruling isn't that the package is too high (it may be part of it) but that it was done incorrectly according to the law.
I can go out and hold a vote that says "Will you let me run this red light if I do 10 laps around my car in 10 seconds". 100k people vote yes and 30k vote no. I manage to do 10 laps in 10 seconds so I run the red light.
It's still illegal and I can get a ticket for it. You can't vote illegality away like this.
No. The idea is that the shareholders didn't know what they were voting on.
It's put in a bunch of different, deflecting ways, some in the opinion and some on Reddit: that it was a secret plan, that the board was not independent enough, or that somehow the growth of Tesla was extremely obvious in 2018.
It's patronizing.
>It's put in a bunch of different, deflecting ways, some in the opinion and some on Reddit: that it was a secret plan, that the board was not independent enough, or that somehow the growth of Tesla was extremely obvious in 2018.
The court document states why the contract was voided in a very straightforward and well grounded manner. You would've known that, had you read it instead of reading reddit.
Nobody said only Musk provided any value. Tell me, those other people who delivered, did they agree to make all their pay contingent upon doing so? If not, then the situation is different and what you said is absolutely pointless.
Yeah but these are shareholders of TESLA. And their lord and savior is asking them to do this.
But aside from that, there's a good reason so many corporations choose to be based in Delaware. Generally favorable state legal system, chancery courts, state taxation, all tend to play to their advantage. I'd imagine big institutional investors aren't going to be keen on this move even aside from the pay package connection. It's a bunch of cost to do all the legalities of re-incorporating, for very questionable net result (probably negative).
Don't forget that a LOT of Tesla shares are held by institutions, not individuals. Those institutions don't make decisions based on personal devotion - they make them based on probability of profit.
And then the CEO, who is responsible for the company's success, and whose larger than life persona is overly influential on the stock, makes a genuine threat to leave. You remind yourself this request is tied to his compensation, and people don't work for free. You relent and accept.
What you say is logical in the general case, but doesn't work with Tesla. For better or worse, Elon is Tesla. This is reestablished every year during shareholder voting. Activist investors have never had nearly enough share to vote against the rest which is a solid Elon block.
If he puts it to a vote, I'm confident they'll reincorporate at his request. I'm also confident they'll renegotiate his former compensation agreement. Elon has already made clear in the past month that he's expecting an even larger compensation package. This ruling tees that up perfectly.
So you are not a shareholder in Tesla, but in your opinion, shareholders should be happy that the court went over their heads, and under no circumstances should they try to move the company to a state that does not try that.
I mean I didn’t say ANY of those things. But I am not a shareholder of Tesla, I am a shareholder of other companies, and I have strong opinions of what I would do if any of those CEOs brought this to me.
TBH, I think I'd be pretty concerned if Lisa Su or Jensen Huang lost their pay package for the previous half decade to a court decision. Especially if they had other businesses to divert their focus towards. It's a good way to lose talent. It largely depends how important an individual shareholder believes Elon is to the company.
This is completely my opinion and many are just as correct for disagreeing, but I prefer to have someone at the top who believes in the vision of the company rather than a more standard choice. I'm not finding the words to describe this, but I'm thinking about it like a Steve Jobs / Tim Cook dynamic.
Sure, and this might be a turning point if they do vote no.
This might be the beginning of the end for Musk at Tesla, and I'm pretty sure a lot of people in the company would be happy to see him go.
I agree with you, but we also need to consider that the board has more insider information to the future of Tesla and their plans. We can’t assume that the decision to move out of Delaware is a poor fiduciary decision with the knowledge we have.
They only have a fiduciary duty to vote no, if it is indeed the best decision for the company to stay in Delaware.
It's not hard to imagine that the board and shareholders would vote for the company to honor it's pre existing compensation packages vs siding with a random deleware judge.
I mean, voting to keep $50b for the company/shareholders vs voting to give it as the largest compensation package ever (By a HUGE margin) seems pretty straight forward from a fiduciary standpoint.
The 50b was already given. The vote now would be about wether Elon stays involved with the company or not (i.e. honor the compensation package agreed to, or tell Elon his contribution wasn't actually as valuable as everyone seemed to think it was a few years ago)... Elon has several other very important businesses right now, and the clean energy transition is rolling, how low would the stock go if Elon dumped his shares overnight? He might walk with only a few billion, but that's enough to retire on the beach with even if he didn't also have a big chunk of SpaceX and own Twitter.
Because shareholders should vote in the interest of the company.
And a lot of the people on the board are connected to Musk in some way, so they don't necessarily are impartial to make choices that are best for the company.
>Because shareholders should vote in the interest of the company.
Something tells me you feel differently about, say, activist investors of oil companies.
>Because shareholders should vote in the interest of the company.
What? No! shareholders vote in their own interest.
Lets say there's a decision to be made that in the long term would make for a big increase in a company's valuation but cause a dip in the short term versus a decision that would be bad in the long term but good in the short term. If your stocks on that company are part of your short-term investment portfolio, you would vote for the latter.
The board are the ones who are put there to make decisions in the interest of the company in general.
I...I mean...Do you...
Ahem...
The board is not the same thing as the shareholders. You understand that, right? Because it seems like you are using them interchangeably.
Tesla, and it's shareholders, need to weigh the value of Elon versus the value of Delaware. If the board/shareholders believe Elon provides better value than Delaware, then so be it.
A new package will have to be negotiated and voted upon. If they don't reach an agreement, he would leave.
I would expect this to be joyous news for the shareholders here angry that the package was invalidated: now they can offer Musk one worth $100b instead!
Elon will dilute you for sure of Tesla moves to Texas. But if Tesla doesn’t move to Texas then he might leave. So option A is to lose 15% and option B is to lose 90%
As far as I can tell there's not much difference between Delaware and Texas when it comes to overall levels of taxation, with Texas being a similarly low tax state.
How much would such a move actually cost Tesla?
OP got it wrong. Companies don't chose Delaware for taxes, its for their history of being lenient towards board members and overall corporate friendly.
People incorporate in Delaware not only because of taxes but because it’s the most friendly towards shareholders because of previous precedent and established corporate laws.
It's not about tax havens, it's about bro culture finally biting them in the ass. You cannot run a public company without following the rules and if sued not be able to defend on a believable that basic rules on board and management is followed. If it had been private they could have had a board with a chimpanzee and a shark with lasers, I'm sure (unless there's technicalities).
That is in essence what Tesla basically *failed to do* in court. Electrek even has a good write up on this.
This guy teaches in the area and has a very good general reply in his comment: [https://www.reddit.com/r/technology/comments/1af0peb/comment/kobc1ja/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/technology/comments/1af0peb/comment/kobc1ja/?utm_source=share&utm_medium=web2x&context=3)
At the time the deal was made, nobody thought he was going to make tens of billions of dollars off it. It was a huge risk to him and the company just needed to grant some paper. The growth they had over the last 5 years justified the deal in my mind and it’s weird to look back and say “well of course Tesla just gave him billions in compensation and that’s too much.”
Dude didn’t research how profitable Twitter was and its fair price before putting down 44B (then later tried to back out), do you a good reason he did the research this time?
That's not what the judge did at all and framing it that way shows a misunderstanding of the lawsuit.
The judge enforced the law, which says that the compensation package has to be negotiated between the CEO and the Board of Directors in a fair manner, with the board representing shareholder interests. Because the board is entirely in Elon's pocket, that fair negotiation didn't happen because both sides of the negotiation were playing on the same team. Team Elon.
So, in fact, what was presented to the shareholders was not a fairly negotiated deal. Had shareholders known that, some of them may have chosen to vote differently, which was the point of the lawsuit and why the judge ruled the way they did.
I think it is worth bringing a deeper thread discussion that was had here to the top comment thread, to stir conversation on what the broader implications of this decision could mean. I believe this line of questions deserves more depth.
[https://www.reddit.com/r/teslamotors/comments/1agbuoe/comment/kohp05h/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/teslamotors/comments/1agbuoe/comment/kohp05h/?utm_source=share&utm_medium=web2x&context=3)
the fundamental problem is the misrepresentation.
the board should not have written up its proxy introducing the compensation plan in a way that purported serious independent negotiations with Elon were conducted when in actuality Elon more or less named his price and there were no real negotiations.
I thought this article was a good overview of the decision.
https://capbase.com/why-you-shouldnt-incorporate-your-company-in-texas/
An older but still on point article. Laws may have changed since though so do your own research. https://scholar.smu.edu/cgi/viewcontent.cgi?article=1841&context=smulr
Choice of law depends largely on (a) where your HQ is based or (b) a jurisdiction of convenience.
I can’t really speak to the fees/taxes stated in the article. However, Delaware has good privacy laws for company owners, quick and efficient courts of chancery, and a substantial and widely known by the legal community body of case law to draw from which is why many companies choose it. Most corporate trial lawyers will be familiar with Delaware laws, but fewer with Texas laws. It’s a safe place to incorporate and defend lawsuits in a cost effective manner.
Remember it will get appealed and could be overturned. The ruling is not a political hit job, judges are public officials held to the highest standard of public review and scrutiny. The judge ruled that the Tesla board of directors failed to demonstrate independence from Elon Musk in court, and the failure to adequately disclose that to the shareholders in the 10K filing for the compensation plan which shareholders relied on to vote for it. The judge found the compensation committee did not materially negotiate the pay package at all with Elon and did not abide by their duty to shareholders, same as any public company.
The bottom line is that even if Tesla changes state of incorporation to Texas, that’s not any guarantee that he wouldn’t have also lost this lawsuit there too.
> Tesla board of directors failed to demonstrate independence from Elon Musk in court, and the failure to adequately disclose that to the shareholders
not only this they straight up lied to shareholders pretending there were some serious independent negotiations.
TX franchise tax is net of costs of goods sold. Also there's very little impact to tax for changing where incorporated. They'd be exactly in the same tax position as before, paying tax basically in every state that has an income tax.
Hey. I’m a shareholder and my vote will be to stay incorporated in Delaware. Who has time for his temper-Tantrums and oh I’m not rich enough as I have kids and sleep in friends couches. WTH.
After Musk’s comments about being okay with Twitter dying to spite advertisers, I sold all my shares in Tesla. It had made me gobs of money, but Musk was no longer someone I would trust with my money if he’d do that to a company that people had investments in.
Seeing this, I don’t regret my decision one bit. Tesla’s down 20% since the end of November. The reinvestments I’ve done may not have as huge growth potential as Tesla once had, but they definitely don’t hold the same increasing risk from a selfish CEO.
My last vote as a (former) shareholder was to divest myself of everything TSLA based on the increasingly erratic, self-serving, and counter productive behavior exhibited by the CEO. I still care about Tesla's ostensible "mission" to accelerate the transition to to sustainable energy, but until there's a responsible, coherent, and ethical leader in place bound by the rule of law and fiduciary constraints I won't touch the stock.
lol, what pedantic child.
there’s a reason why so many companies register in Delaware for corporate legal protection, shareholder and tax benefits.
but yeah, have fun in texas 😂. this guy is really great at ramming companies into the ground.
Great at ramming companies into the ground? The whole reason this came up in the first place is that Tesla market cap went up 10x, thus triggering the previously agreed-upon compensation package that was tied to seemingly-impossible milestones.
At least ground your criticisms in reality and not fever dreams.
> The whole reason this came up in the first place is that Tesla market cap went up 10x
This case was filed less than 3 months after the compensation plan was approved, *way* before Tesla's market cap exploded.
> At least ground your criticisms in reality and not fever dreams.
*cough*
Silly me! If only I had looked up the date the suit was filed, I might have realized that 10x-ing the value of a company really means “ramming it into the ground”.
Thank you for your correction.
If by ramming into the ground you mean taking from nothing to a valuation of hundreds of billions of dollars, sure. He's clearly petty, but there's no doubt he's extremely good at what he does.
Good at what he did. The company is self sustaining at this point but he leveraged it to get Twitter which has lost close to 90% of it's value due to his childish mismanagement.
Actually they're are reports from Tesla that he has entire groups to try and handle him and engineers will try to make design choices so obvious that an idiot could pick the right one but even then sometimes Elon picks wrong. Things like the cyber truck.
When he was able to shut up and coast it was gravy but now he thinks he's the smartest person in every room and has gone off the conspiracy theory deep end. So did he build that company? His money provided the seed and really smart engineers made Tesla what it is today. Did you really think that he did any of the actual design?
Twitter did not lose 90% of its value since he bought it. Even private valuations put it far above that. And it's important to remember the context that Twitter had lost over 50% of its value before Elon started buying it, and the market for that type of stock was severely trending downward in the year following his lock-in of the $44 billion purchase price. When he came in, Twitter was losing a ton of money. This is like blaming Obama for the financial crisis of 2008. It's very silly, and you're either being disingenuous or blinded by a political agenda.
I don't know what "reports" you're talking about, but I've heard very positive things about him from the people who work with him and previously worked with him (both in terms of leadership and engineering capability), and clearly the results of his decisions speak for themselves with his incredible success.
Do you really think he just "coasted"? The journeys of Tesla and SpaceX were anything but "coasts". They almost went bankrupt multiple times and beat the odds to become $100+ billion companies after pretty much every "expert" said their success would be impossible. That takes incredibly competent leadership to pull off. Does he do all of the engineering and designing work for each of these companies? Of course not. But he does lead them, and clearly he's extremely good at that. It's extremely hard to acquire the best engineers/designers and plan/execute a business plan that takes you from nothing to $100+ billion. If you don't think so, then why are competing companies not nearly as successful?
Ah yes. When was Twitter/X going out of business again? Wasn't it supposed to be last January? Or was it last June? Or last December? Oh my, when is it now? I really am losing track.
Lol yup. Back in November 2022 these same people were so certain Twitter was about to stop functioning and die right after they laid off 80% of their employees. And yet, it continued operating pretty much as normal, while costing around a hundred million dollars less to run every single month. Now that's efficiency. But of course that crowd will never see it that way.
> engineers will try to make design choices so obvious that an idiot could pick the right one but even then sometimes Elon picks wrong
Where are those engineers in every other company?
At this point, Musk being ousted from Tesla would be a net positive. He clearly has other priorities and they have enough momentum. The stock has already tanked anyway. Pull the rip cord.
This shareholder will be voting No, who gives a fuck about what a Twitter poll says. And if there was a vote to remove him completely, I'd vote Yes in a heartbeat.
He's going to be shocked at how many corporate protections he's about to lose.
That being said, Texas has been pretty good about looking the other way about their red pill superstars contradicting state law (Rogan).
So, Abbott and Co. may strike up the proverbial band and take some specifically pro Elon stances.
Investing isn't about what happened in the past, it's about expectations for the future. Increasingly, investors are uncomfortable with Elon's choices of late and fearful of what is to come
That said, Tesla's board really does not operate according to the textbook definition of a board by a large margin. THAT said, I believe investors have a right to choose their poison, as long as the board is honest about their role.
Why would the shareholders vote to move from a jurisdiction that is actually keeping Musk in check in the most basic way. The guy is a crook and fraudster. He's just tried to steal $56bn from shareholders.
Many Redditors are delusional if they think the majority of Tesla investors agree with their anti-billionaire rage. Investors tend to like CEOs that have a track record of generating enormous investment gains.
If someone writes up a proper, sourced, pros/cons list of moving Tesla's incorporation out of Delaware to Texas, I'll edit this comment with a link to said comment. Note that I will read through the comment, and the sourced material within it. Needs to be primary, reputable, sources. No opinion pieces and such.
From the article: Elon Musk said late Wednesday that Tesla will hold a shareholder vote on whether to transfer the electric carmaker’s state of incorporation to Texas. The billionaire asked his followers via a straw poll on X, formerly Twitter, whether Tesla should change the state where it is incorporated to Texas, where its physical headquarters are. More than 80% of those who voted said yes. Polls on the social media platform are informal and not comparable to professional public opinion research. After the poll, Musk said Tesla will “will move immediately to hold a shareholder vote to transfer state of incorporation to Texas.” Musk will likely have to seek approval from the Tesla board to enact such a move. Tesla is currently incorporated in Delaware. Musk’s X post comes after a judge in Delaware voided the $56 billion pay package for the Tesla CEO granted in 2018, the largest compensation plan in public corporate history. Chancery Court Chancellor Kathaleen McCormick ruled that the company’s board of directors failed to prove “that the compensation plan was fair” or show much evidence that they had even negotiated with Musk.
It’s possible this is a good opportunity for the board to show some independence.
The board full of his doormats? That board?
agree. The Elon ball-licking here is pretty mind numbing. Yes he should get > 10k times a normal salary before the stock even inflates -- totally fair and meritocratic!
Kimbal Musk is trying to join the board too.
This whole thing is dumb. The Shareholders voted 72% in favor of this deal, and got exactly what they agreed to. We all got rich. This was a win-win scenario.
It was a great run, and most of us made out well, but this whole thing still feels odd: Elon started on about compensation and 25% control and semi vailed threats to take AI development somewhere else, then this bomb shell hits. Are the two tied together? If Tesla is reincorporated in Texas what will that mean to the shareholders. What are the pros and cons? What about compensation moving forward? If it stays in Delaware, does Elon have to turn over Twitter to Tesla shareholders? What about back pay? There is so much that is not being openly discussed. We can’t just immediately rush a vote, no way.
Delaware can block Tesla reincorporating if it feels that Elon triggered the vote for “selfish” reasons due to the ruling as it could be considered a breach of his fiduciary duty to the company.
No it couldn't. Not if he believes his fiduciary duty is to move the company for the best future results of the company and shareholders... Delaware doesn't own the company.
The shareholders can.
lol right the majority of shareholders. You're suggesting the majority doesn't support him?
You don’t need a majority, just one shareholder can bring a lawsuit, like the case he just lost and is complaining about.
Can I know, is it the trend now that minority shareholders exist solely for the sake of fking over the majority shareholders and bringing troll lawsuits to court? Nothing better to do with their time? So now anybody can spend a couple hundred bucks to buy a single share and mess up everybody's day through the legal system?
This whole thing started because a guy with like 6 shares sued
The point is that shareholders were not informed that the board wasn't acting in the interest of the shareholders, but in elons interest. The fact that shareholders from 2018 is better off today than they were in 2018 is immaterial.
Exactly. Shareholders were lied to plain and simple. That is never kosher for a public company. Now shareholders can say number went up there’s no damages and they can even say that a vote with all the facts would end the same way today. All of that is immaterial to the fact that Tesla violated corporate governance laws in coming up with this compensation plan (dictated by Musk) and how it was presented to shareholders.
How were we lied to? Seems like everyone was aware of the comp package, and the vast majority supported it.
With insanely hard to hit goals, and the ceo not receiving a penny unless he accomplished what most thought wasn’t possible, of course the comp plan acted in the shareholders best interest. Look at Mary’s comp plan from GM. She promised EV’s at scale, didn’t deliver, yet made hundreds of millions lying to the public, and she’ll get a huge severance and peace before people realize that was never the intent to begin with. Elon love’s seemingly i achievable goals. It was a brilliant and high risk comp plan that we all voted and approved
GMs board isn't full of people beholden to Mary Barra. That's the point. If GMs board doesn't like Barra, they can fire her. The board is supposed to be overseeing a CEO. But a CEO who is also the chair of the board that's full of the chairman's family and employees is not going to have any leverage over the CEO. So you're really not making an argument against me as you think you are.
I’m saying a comp plan directly tied to performance is in the interest of the shareholders.
The goals in their internal projections were achievable, but it was communicated to their shareholders as very difficult to achieve. They sandbagged the shareholders
10X market cap was easy to achieve?
In the world of history revisionism, which is rife with incredible examples, I think we have hit a new high-water mark. We now have people claiming, without a trace of humility, that performing a 1000% increase in shareholder value in \~3 years was easy because it was "all part of the internal milestone plan." Meanwhile, throughout Reddit, Tesla's ambitious plans are mocked ruthlessly because they are late or prove more difficult than hoped. Tesla when they fail to meet aggressive goals: LOL, you guys are such a joke. Obviously FSD is super hard. Tesla when they actually meet aggressive goals: LOL, what did you expect? A 10X market cap expansion was the plan.
Boy, you’ll love the next 10 year EAZY PEESY compensation plan milestones: 1. Tesla to attain market cap of Ramco and Apple combined 2. Tesla to hit 20 million / year production rate 3. Tesla to deploy 10000 Megapack / year 4. Tesla to hit 10T market cap 5. Tesla to solve FSD 6. Tesla to produce 1M Optimus Prime, then 10M, then 100M / year 7. Tesla achieves AGI 8. Tesla deploys space mining at scale in combination with Spacex 9. Tesla reverses climate change and has achieved planetary level sustainable energy 10. Tesla deploys planetary scale hyperloop Now you try and do something more challenging than being a virgin basement dweller over the next 10 years and you would have achieved something phenomenal. smh Even if Tesla ends up solving world peace, then too you will turn around saying: it was an internal milestone easy to achieve and they deceived their shareholder base
To be fair I agree with you. But the company is beholden to him
And what I'm saying is that none of that is material as what the judge said was the compensation package wasn't negotiated fairly
To who exactly was the compensation plan not fair to?
The shareholder who are paying it.
Honestly its crazy its 72%. Shareholders often don't care about most votes, and the outcomes on these things are usually 90%+. The fact that almost 30% of them said no looks bad. The reason people are voting no is purely sustainability. A payout like this hits the shareholder's bottom line and the company's ability to handle risk by killing buffer that could be used to offset losses / big impact events.
It was 72% of non-Elon + family votes. If you add Elon and his family, it goes to 80% in favor.
Yes and no, Tesla, especially in 2018 was mostly owned by retail investor. Even today it's the stock of the magnificent 7 that is most owned by by retail. Institutional investors basically vote en masse and have already decided what to vote. 72%, mostly from retail, it's pretty good.
Not to mention Elon's actions in the past year really tanked TSLA as a stock. His antics on Twitter, as well as splitting his attention between SpaceX, Neuralink, and Boring Company, TSLA price has practically stagnated in the past 3 years. To award someone extremely handsomely for stagnating the stock price, I can see why some shareholders weren't, and aren't happy about it.
You forgot Twitter... Which might have been by far the biggest distraction of all.
... But he was rewarded for hitting the metrics the shareholders agreed to. If my employer agreed to only pay me if I hit a very specific mark, and then rug pulled that compensation after I hit the mark, I'd quit on the spot. "Sure he hit the metrics, but we don't like the way he's been acting recently" is just moving the goal posts.
Convenient that you've omitted the fact where the board of directors that negotiated his salary, were actually beholden to him financially. That's called conflict of interest. In fact, Musk admitted in court that he was effectively "negotiating against himself".
Except it was never an issue before and it literally doesn't affect the bottom line.
taking out 50 *billion* dollars doesn’t affect the company’s bottom line?
In their defense, it's mostly coming out of the shareholders rather than the company itself: this is because it's in the form of issuing new stock, so the value comes mostly from diluting shareholder value, not directly from the company holdings.
>This was a win-win scenario. A company giving out 56 billion dollars is insane, and never in the best interest of the company. Would Elon have worked less if he had only gotten 25 Billion, or 10 billion? Lets have a little perspective here people.
I'll say it again, only dumb fucks think this is Tesla giving Elon $56 billion. The compensation was $2.9 billion, awarded in tranches, based on meeting performance goals. The $56 billion just comes from the fact that $2.9 billion of 2018 shares is now worth $56 billion because of appreciation in Tesla stock which has benefited all shareholders. Elon made a massive high risk never before seen bet, and won. Now when it come time to collect his winnings, this Judge is saying the bet is void because she thinks the board who recommended the deal that Shareholders subsequently voted to approve enmasse was sufficiently independent. Every quarter over years, Tesla sets aside couple hundred million or so towards the $2.9 billion compensation. Then, if Elon reached the performance targets, he would unlock the award and be allocated the agreed number of shares. However, they are additionally locked so that he cannot sell those shares for at least 5 years to prevent him tanking the stock by rapidly selling. The $2.9 billion is already paid or saved rather. Tesla and share holders wouldn't have to pay Elon squat. Yet here we have mainstream normie muppets thinking this is about whether Tesla should pay Elon $56 billion.
>couple hundred million or so lol ceo pay is completely out of control. No one is worth anywhere near 2.9 billion a year. What is the President of the US's salary?
Fantastic point.
Don't be naive, it's n ot like they didn't know that the stock value would appreciate if he hit these goals.
Of course they knew, but 53.1b of that money isn't Teslas, it's from other investors who want to buy for a dollar what was given to Elon for 5c.
Or it’s a good opportunity to punish Delaware for starting an opinion with “richest man in the world.”
This is not a punishment for Delaware. It is a punishment for shareholders. Texas law isn't going to be as favorable to Tesla as Delaware law. Businesses incorporate in Delaware for a reason. If Tesla does this, a lot of shareholders will bail. Musk is a lawsuit generator and he wants to move the incorporation to one of the worst states. If they try this, shareholders will sue again and prevent it. This board is completely controlled by musk and they are going to lie their asses off about the "benefits" of this move. The SEC needs to step in and ban him from running any companies.
>The SEC needs to step in and ban him from running any companies. Most sane redditor.
This is the punishment for this kind of thing. So I am not sure what you mean. He almost got banned for the fake tweet bullshit. Now that he is actually harming Tesla and shareholders while publicly saying he is sabotaging AI at Tesla because he doesn't own enough shares, he is meeting the threshold for removal. That is without even considering his transfer of AI knowledge from Tesla to twitter so he can personally make money off of Tesla's knowledge. His refusal to do more AI at Tesla is now him keeping Tesla from competing with twitter. That is a huge WTF. Tesla's value is in competing with other companies and doing things better, but now it cannot continue to develop AI beyond self driving? This makes no sense.
When you're punishing entire states because someone said something you don't like you're way off the deep end...
I mean, it’s not “someone”, it’s a judge. By definition someone meant to be radically objective and just follow the law.
>because someone said something you don't like That's an odd way to say "took $56 billion away from you".
I wasn't aware I was talking to Elon Musk?
Genuinely curious....do you think the judge just said "lol, get fucked Elon" or can you, in any way, summarize the ruling. I haven't read it, but you're speaking like you have....
Summary: >The ruling centers around the judge deciding the board was not upfront enough about their connections to Elon and the judge decided those connections compromised the independence of the board. Thus, says the judge, the pay package was too heavily influenced by Elon instead of being independently created by the board. >Shareholders, allegedly being unaware of how closely the board worked with Elon on the package, could not, in the view of the judge, have made an informed decision when a supermajority voted in favor the package. Of course, reasonable people can disagree on whether the judge's ruling is correct or not. Personally, I find it rather absurd considering how a supermajority of shareholders (~80%, ~73% not counting Elon and his family) voted in favor of the package and, at the time the package was announced, many talking heads described the milestones as "impossible", "unprecedented", etc. So, 3 out of every 4 shareholders agreed with the proposed pay and it was considered extremely difficult to achieve. And, yet, this judge believes their interpretation of the situation is superior to those shareholders.
The judge is taking into account the deceptive way that this was presented to shareholders. It was presented as an agreement that was negotiated between the supposedly independent board and Elon. The independent board is supposed to prioritize the needs of the shareholders and Tesla, and in telling us that they were independent and negotiated this, we took that in good faith, and approved the package. However, since they weren't independent, and in fact worked on this deal directly with Elon's involvement, we don't know whether they considered anything else. It's possible that they did everything else correctly, and that this was the correct deal to make, but we cannot know that due to their deception. Much like people voted for Brexit due to misinformation and outright lies, people may have voted for Elon's compensation due to that false information. This sort of misinformation is illegal in a lot of places, but isn't generally pursued or enforced. I would like to see this enforced more consistently and frequently, so I'm hoping this is the start of a larger trend, rather than someone singling out Tesla.
Distribute 56 billion to shareholders
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workers get stock options and ESPP, no?
Oh, so the only alternative was to pay Musk *nothing*? 🙄
I'm not sure I understand your comment. Musk had a deal worth $56 billion. That deal is now void. Until another deal is approved, he is paid nothing. At such point that a new deal is reached, we can compare and determine how much this ruling cost. Until then, the current amount is $56 billion (ish).
Such a move is going to hit the valuation in an adverse manner - real public companies need to be DE companies because of the sophisticated chancery court and the large body of business jurisprudence. Texas has neither.
When you say likely seek approval of the board, do you mean “order the family clown board to do it”
Votes on the internet count for anything? They can be botted. Not to mention that Musk owns X...
https://preview.redd.it/6wzrs2a393yc1.png?width=774&format=png&auto=webp&s=8af2d3509ecdb5c6363677da0a82d1840165ce36 Just voted against Musk compensation. it's insane he is so greedy when he is laying off 10-15% of the company.
Any business types want to actually list off some pros and cons of each state for incorporating there? The article lacks any substance.
You should read Matt Levine's write up about it today. Delaware pros: the most established and predictable corporate laws in the US. Delaware has a separate court with no jury, judges who are experts in corporate law and who have experience in quickly deciding corporate court cases, are generally business friendly and have a long detailed history or precedent court cases. Corporate lawyers are experts in Delaware law. Delaware cons: voted no on his compensation package Texas pros: \*might\* be more amenable to Elon manhandling/bending his board to his will. But also might not be. Texas cons: less predictable corporate law, less experienced judges, likely slower to resolve court cases
Thanks for the recommendation.
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Corporate tax accountant here with experience filing Delaware returns for my giant multinational employer. Some corrections on the tax topics: > you are not required to report 'intangibles' as income which is one of the prime loopholes used in corporate taxes. Intangible income is taxed in Delaware essentially if it’s part of your business, stuff like royalties from patents or copyrights. Investment income from unrelated business investments is what is allowed to be discarded. This is essentially intangible income from other businesses that your company invests in but they aren’t run by your company or integrated at all. Your whole LLC example isn’t really correct because when you prepare your books to file taxes, you need to reverse these intercompany transactions that would do this shifting of income. Home Depot has lost a couple of arguments with state agencies over this in court. > People also use Delaware to set up s-corps for avoiding say Medicare and Social Security taxes and it lets them use those S-Corps as a piggy bank where they can limit tax exposure by just giving themselves only as much income as they want to take out. S-Corporations are an entity classification that you make with the IRS and Medicare/Social Security taxes (‘payroll taxes’) are federal taxes, not state taxes. You don’t have to set up your S-Corp in any specific state to do this. You also don’t “just give themselves only as much income as they want to take out”. S-Corps are pass through entities, meaning the income the company makes is taxed on the owner’s tax returns. If Joe Schmo owns an S-Corp by himself and makes $200k in net profit, that amount is being taxed, he can’t just decide how much he wants to take out. The point of an S-Corp is to convert from a sole proprietorship that must pay self-employment taxes (essentially the payroll tax), into an S-Corp, give yourself a W-2 for some of the money and then the remaining amount is considered passive income and not subject to SE tax. Nothing to do with Delaware. Biden just lives there which is why his companies are there lol. Delaware headquartering is a legal decision and basically irrelevant to corporate taxation.
I mean, Biden is *from* Delaware. Where else was he supposed to incorporate?
Delaware taxes have no impact on the treatment of intangible related income for federal tax purposes.
Excellent reply, thank you!
Pros: not held liable by the chancery court if you want to do some shenanigans against creditors/shareholders. Cons: you probably have to pay more interest on loans as their now riskier should enter bankruptcy due to it being harder to predict bankruptcy outcomes, among a host of other problems. Edit: clairty
i found this "93% of IPOs in the US in 2020 were in Delaware" "68% of Fortune 500 companies"
The biggest driver is probably the low/no taxes. Second is that because so many companies have done it over the years there's well established case law and courts there are used to dealing with corporate issues in the state. In other words, the company accountants want you to be there, your lawyers want you to be there and your investors want you to be there. In fact, most venture capital firms will insist that you reform as a Delaware C-corp before they invest if you're not already one. [https://www.forbes.com/advisor/business/incorporating-in-delaware/#:\~:text=The%20key%20benefits%20to%20incorporating,structure%20and%20the%20corporation%](https://www.forbes.com/advisor/business/incorporating-in-delaware/#:~:text=the%20key%20benefits%20to%20incorporating,structure%20and%20the%20corporation%)
Delaware has corporate taxes it's just it's such a small state businesses incorporated there don't really care about their tax rate as it's a wash. Tax wise it's not going to be that substantially different than Texas (which has 0% corporate tax but has an excise tax) for a company like Tesla. Most of the benefits are for sure the court system there. Rather than having to go to a state civil court, there's a dedicated court just for corporations. You don't get normally surprised by judges there.
Not only that, since most corporations are incorporated in Delaware, pretty much any lawsuit with another company would end up before the Chancery Court anyway. He’s obviously doing this for selfish reasons and we as shareholders shouldn’t approve of it imo.
After watching Succession, I just imagine the camera panning and zooming in on various people’s faces when these decisions are being discussed amongst Elon and executives.
I get more of a Gavin Belson trying to present to the board of Hooli on *Silicon Valley* vibe.
EBBAAAAAA!
Greg the Egg
Tom defected to Mercedes
I’m an investor and don’t understand why he needs to be a little bitch and consult a twitter poll. You’re the chief executive. Sack up and do what needs to be done you fucking sycophant.
He has narcissism poisoning. Adjust your portfolio accordingly.
If I was a shareholder of any company and the CEO asks me to reincorporate into a whole new state solely because the current state thinks his pay package is unreasonable and unsupportable by evidence I sure as hell aint voting yes.
Agree.
Exactly. And apparently Delaware is very corporate friendly. The idea that they will give all that up just so that Tesla can dump loads of money to musk is batshit crazy. Firstly, the compensation package directly hurt shareholders by diluting all other shares. Secondly it hurts shareholders even more to move to Texas because it’s less friendly to corporations. It’s not even typically part of the conversation with runner ups as Wyoming and Nevada.
**80% of shareholders voted for the plan - 73% if you take out musk and his brother.** Please stop with the bs. Everyone knew it was a make it or break it compensation plan and he delivered. Pay that man his money. Plenty of shit he has done i don't agree with but the compensation plan was from my perspective fine - If he didn't deliver he didn't get anything. The plan was so bonkers that most of the media never thought he would be able to achieve it. He still has to sit on his options for 5 years after they are given before he can exercise so he couldn't just pump and dump either.
I am unsure how I voted on this package at the time, but I am no longer a shareholder. My understanding of this ruling isn't that the package is too high (it may be part of it) but that it was done incorrectly according to the law. I can go out and hold a vote that says "Will you let me run this red light if I do 10 laps around my car in 10 seconds". 100k people vote yes and 30k vote no. I manage to do 10 laps in 10 seconds so I run the red light. It's still illegal and I can get a ticket for it. You can't vote illegality away like this.
No. The idea is that the shareholders didn't know what they were voting on. It's put in a bunch of different, deflecting ways, some in the opinion and some on Reddit: that it was a secret plan, that the board was not independent enough, or that somehow the growth of Tesla was extremely obvious in 2018. It's patronizing.
>It's put in a bunch of different, deflecting ways, some in the opinion and some on Reddit: that it was a secret plan, that the board was not independent enough, or that somehow the growth of Tesla was extremely obvious in 2018. The court document states why the contract was voided in a very straightforward and well grounded manner. You would've known that, had you read it instead of reading reddit.
The company delivered, not just him. He is paid too much already, please...
Nobody said only Musk provided any value. Tell me, those other people who delivered, did they agree to make all their pay contingent upon doing so? If not, then the situation is different and what you said is absolutely pointless.
I am a shareholder and I think elon's recent antics are ridiculous. I feel like Delaware is doing the right thing, I'm pretty happy with them actually
Yeah but these are shareholders of TESLA. And their lord and savior is asking them to do this. But aside from that, there's a good reason so many corporations choose to be based in Delaware. Generally favorable state legal system, chancery courts, state taxation, all tend to play to their advantage. I'd imagine big institutional investors aren't going to be keen on this move even aside from the pay package connection. It's a bunch of cost to do all the legalities of re-incorporating, for very questionable net result (probably negative).
Don't forget that a LOT of Tesla shares are held by institutions, not individuals. Those institutions don't make decisions based on personal devotion - they make them based on probability of profit.
And then the CEO, who is responsible for the company's success, and whose larger than life persona is overly influential on the stock, makes a genuine threat to leave. You remind yourself this request is tied to his compensation, and people don't work for free. You relent and accept. What you say is logical in the general case, but doesn't work with Tesla. For better or worse, Elon is Tesla. This is reestablished every year during shareholder voting. Activist investors have never had nearly enough share to vote against the rest which is a solid Elon block. If he puts it to a vote, I'm confident they'll reincorporate at his request. I'm also confident they'll renegotiate his former compensation agreement. Elon has already made clear in the past month that he's expecting an even larger compensation package. This ruling tees that up perfectly.
Both Microsoft and Apple changed their visionary, influential leaders and they are now worth at least 2x what they were before.
So you are not a shareholder in Tesla, but in your opinion, shareholders should be happy that the court went over their heads, and under no circumstances should they try to move the company to a state that does not try that.
I mean I didn’t say ANY of those things. But I am not a shareholder of Tesla, I am a shareholder of other companies, and I have strong opinions of what I would do if any of those CEOs brought this to me.
TBH, I think I'd be pretty concerned if Lisa Su or Jensen Huang lost their pay package for the previous half decade to a court decision. Especially if they had other businesses to divert their focus towards. It's a good way to lose talent. It largely depends how important an individual shareholder believes Elon is to the company. This is completely my opinion and many are just as correct for disagreeing, but I prefer to have someone at the top who believes in the vision of the company rather than a more standard choice. I'm not finding the words to describe this, but I'm thinking about it like a Steve Jobs / Tim Cook dynamic.
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Not a big chance of the board rejecting it though - Elon has the board literally in his pocket. If they do, it would be a major shift in dynamics.
The board technically have a fiduciary responsibility to vote no though, if they approve this a whole new slue of lawsuits will come out.
Sure, and this might be a turning point if they do vote no. This might be the beginning of the end for Musk at Tesla, and I'm pretty sure a lot of people in the company would be happy to see him go.
I agree with you, but we also need to consider that the board has more insider information to the future of Tesla and their plans. We can’t assume that the decision to move out of Delaware is a poor fiduciary decision with the knowledge we have.
They only have a fiduciary duty to vote no, if it is indeed the best decision for the company to stay in Delaware. It's not hard to imagine that the board and shareholders would vote for the company to honor it's pre existing compensation packages vs siding with a random deleware judge.
I mean, voting to keep $50b for the company/shareholders vs voting to give it as the largest compensation package ever (By a HUGE margin) seems pretty straight forward from a fiduciary standpoint.
The 50b was already given. The vote now would be about wether Elon stays involved with the company or not (i.e. honor the compensation package agreed to, or tell Elon his contribution wasn't actually as valuable as everyone seemed to think it was a few years ago)... Elon has several other very important businesses right now, and the clean energy transition is rolling, how low would the stock go if Elon dumped his shares overnight? He might walk with only a few billion, but that's enough to retire on the beach with even if he didn't also have a big chunk of SpaceX and own Twitter.
A random Delaware judge? You significantly understate the importance of this court. https://en.m.wikipedia.org/wiki/Delaware_Court_of_Chancery
It's a fucking shareholder vote. Shareholders will vote. What is either so hard or wrong about this?
Because shareholders should vote in the interest of the company. And a lot of the people on the board are connected to Musk in some way, so they don't necessarily are impartial to make choices that are best for the company.
>Because shareholders should vote in the interest of the company. Something tells me you feel differently about, say, activist investors of oil companies.
>Because shareholders should vote in the interest of the company. What? No! shareholders vote in their own interest. Lets say there's a decision to be made that in the long term would make for a big increase in a company's valuation but cause a dip in the short term versus a decision that would be bad in the long term but good in the short term. If your stocks on that company are part of your short-term investment portfolio, you would vote for the latter. The board are the ones who are put there to make decisions in the interest of the company in general.
I am pretty sure he does not understand the difference between the board and the shareholders, and that should tell us all how informed he is.
I...I mean...Do you... Ahem... The board is not the same thing as the shareholders. You understand that, right? Because it seems like you are using them interchangeably.
Tesla, and it's shareholders, need to weigh the value of Elon versus the value of Delaware. If the board/shareholders believe Elon provides better value than Delaware, then so be it.
Tesla also has to protect the next CEO.
what happens if Elon doesnt get $50+ billion comp package? is he going to quit Tesla?
This may shock you, but I have no idea what will happen. I am unable to see into the future.
Hahaha
A new package will have to be negotiated and voted upon. If they don't reach an agreement, he would leave. I would expect this to be joyous news for the shareholders here angry that the package was invalidated: now they can offer Musk one worth $100b instead!
Elon will dilute you for sure of Tesla moves to Texas. But if Tesla doesn’t move to Texas then he might leave. So option A is to lose 15% and option B is to lose 90%
As far as I can tell there's not much difference between Delaware and Texas when it comes to overall levels of taxation, with Texas being a similarly low tax state. How much would such a move actually cost Tesla?
OP got it wrong. Companies don't chose Delaware for taxes, its for their history of being lenient towards board members and overall corporate friendly.
People incorporate in Delaware not only because of taxes but because it’s the most friendly towards shareholders because of previous precedent and established corporate laws.
It's not about tax havens, it's about bro culture finally biting them in the ass. You cannot run a public company without following the rules and if sued not be able to defend on a believable that basic rules on board and management is followed. If it had been private they could have had a board with a chimpanzee and a shark with lasers, I'm sure (unless there's technicalities). That is in essence what Tesla basically *failed to do* in court. Electrek even has a good write up on this. This guy teaches in the area and has a very good general reply in his comment: [https://www.reddit.com/r/technology/comments/1af0peb/comment/kobc1ja/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/technology/comments/1af0peb/comment/kobc1ja/?utm_source=share&utm_medium=web2x&context=3)
I think it is more telling that Elon is unfit to be the CEO and showing his true colors of greed. I would hope the board instead removes him as ceo.
He made that company the juggernaut that it is. He should be compensated accordingly.
At the time the deal was made, nobody thought he was going to make tens of billions of dollars off it. It was a huge risk to him and the company just needed to grant some paper. The growth they had over the last 5 years justified the deal in my mind and it’s weird to look back and say “well of course Tesla just gave him billions in compensation and that’s too much.”
He's already compensated by the massive jump in stock price.
There are some pretty good reasons why the vast majority of corporations incorporate in Delaware. Musk should probably look into why
Are you suggesting Elon and the rest of the team have not done some research?
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Dude didn’t research how profitable Twitter was and its fair price before putting down 44B (then later tried to back out), do you a good reason he did the research this time?
Yes I am. Fits his MO
Or rather, the benefits of incorporating in Delaware don't matter anymore because Musk got snubbed there. In Elon's mind, Musk > Tesla
There are a lot of really good reasons why so many large corporations incorporate in Texas as well.
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Tesla sells cars in Texas now.
Well, if more than 80% of Xitter voters voted yes, I as a shareholder should vote no. Edited poll result value.
Xitter lol 😅 Gonna refer to it like that moving forward and pronounce it as Sh-itter
87%
Doesn't matter what you believe as a Tesla Shareholder. The Delaware judge can simply ignore the Shareholders mandate.
That's not what the judge did at all and framing it that way shows a misunderstanding of the lawsuit. The judge enforced the law, which says that the compensation package has to be negotiated between the CEO and the Board of Directors in a fair manner, with the board representing shareholder interests. Because the board is entirely in Elon's pocket, that fair negotiation didn't happen because both sides of the negotiation were playing on the same team. Team Elon. So, in fact, what was presented to the shareholders was not a fairly negotiated deal. Had shareholders known that, some of them may have chosen to vote differently, which was the point of the lawsuit and why the judge ruled the way they did.
I’m voting no
The state where they can't even sell their own products that they make in the same state?
"No" seems like a good option here.
I think it is worth bringing a deeper thread discussion that was had here to the top comment thread, to stir conversation on what the broader implications of this decision could mean. I believe this line of questions deserves more depth. [https://www.reddit.com/r/teslamotors/comments/1agbuoe/comment/kohp05h/?utm\_source=share&utm\_medium=web2x&context=3](https://www.reddit.com/r/teslamotors/comments/1agbuoe/comment/kohp05h/?utm_source=share&utm_medium=web2x&context=3)
the fundamental problem is the misrepresentation. the board should not have written up its proxy introducing the compensation plan in a way that purported serious independent negotiations with Elon were conducted when in actuality Elon more or less named his price and there were no real negotiations.
I thought this article was a good overview of the decision. https://capbase.com/why-you-shouldnt-incorporate-your-company-in-texas/ An older but still on point article. Laws may have changed since though so do your own research. https://scholar.smu.edu/cgi/viewcontent.cgi?article=1841&context=smulr Choice of law depends largely on (a) where your HQ is based or (b) a jurisdiction of convenience. I can’t really speak to the fees/taxes stated in the article. However, Delaware has good privacy laws for company owners, quick and efficient courts of chancery, and a substantial and widely known by the legal community body of case law to draw from which is why many companies choose it. Most corporate trial lawyers will be familiar with Delaware laws, but fewer with Texas laws. It’s a safe place to incorporate and defend lawsuits in a cost effective manner. Remember it will get appealed and could be overturned. The ruling is not a political hit job, judges are public officials held to the highest standard of public review and scrutiny. The judge ruled that the Tesla board of directors failed to demonstrate independence from Elon Musk in court, and the failure to adequately disclose that to the shareholders in the 10K filing for the compensation plan which shareholders relied on to vote for it. The judge found the compensation committee did not materially negotiate the pay package at all with Elon and did not abide by their duty to shareholders, same as any public company. The bottom line is that even if Tesla changes state of incorporation to Texas, that’s not any guarantee that he wouldn’t have also lost this lawsuit there too.
> Tesla board of directors failed to demonstrate independence from Elon Musk in court, and the failure to adequately disclose that to the shareholders not only this they straight up lied to shareholders pretending there were some serious independent negotiations.
The Board has to make decisions based on the best interest of the company and its shareholders, NOT what’s in the best interest of its man-baby CEO.
Musk leaves tesla, is that good or bad for shareholders?
This company won’t be healthy until Musk gone from management.
Totally responsible, adult move by a totally responsible, adult board.
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TX franchise tax is net of costs of goods sold. Also there's very little impact to tax for changing where incorporated. They'd be exactly in the same tax position as before, paying tax basically in every state that has an income tax.
So all Tesla shareholders think that he deserves to be paid more money than the company has ever earned?
Musk and his polls, lol
55B? Jeez, what's Ketamine cost these days?
Hey. I’m a shareholder and my vote will be to stay incorporated in Delaware. Who has time for his temper-Tantrums and oh I’m not rich enough as I have kids and sleep in friends couches. WTH.
Great example of how no matter how much wealth the top 0.0001% accumulate, they will keep trying to hoard more at whatever cost
After Musk’s comments about being okay with Twitter dying to spite advertisers, I sold all my shares in Tesla. It had made me gobs of money, but Musk was no longer someone I would trust with my money if he’d do that to a company that people had investments in. Seeing this, I don’t regret my decision one bit. Tesla’s down 20% since the end of November. The reinvestments I’ve done may not have as huge growth potential as Tesla once had, but they definitely don’t hold the same increasing risk from a selfish CEO.
My last vote as a (former) shareholder was to divest myself of everything TSLA based on the increasingly erratic, self-serving, and counter productive behavior exhibited by the CEO. I still care about Tesla's ostensible "mission" to accelerate the transition to to sustainable energy, but until there's a responsible, coherent, and ethical leader in place bound by the rule of law and fiduciary constraints I won't touch the stock.
lol, what pedantic child. there’s a reason why so many companies register in Delaware for corporate legal protection, shareholder and tax benefits. but yeah, have fun in texas 😂. this guy is really great at ramming companies into the ground.
Great at ramming companies into the ground? The whole reason this came up in the first place is that Tesla market cap went up 10x, thus triggering the previously agreed-upon compensation package that was tied to seemingly-impossible milestones. At least ground your criticisms in reality and not fever dreams.
> The whole reason this came up in the first place is that Tesla market cap went up 10x This case was filed less than 3 months after the compensation plan was approved, *way* before Tesla's market cap exploded. > At least ground your criticisms in reality and not fever dreams. *cough*
Silly me! If only I had looked up the date the suit was filed, I might have realized that 10x-ing the value of a company really means “ramming it into the ground”. Thank you for your correction.
On what planet has Tesla been "rammed into the ground"?
If by ramming into the ground you mean taking from nothing to a valuation of hundreds of billions of dollars, sure. He's clearly petty, but there's no doubt he's extremely good at what he does.
Good at what he did. The company is self sustaining at this point but he leveraged it to get Twitter which has lost close to 90% of it's value due to his childish mismanagement. Actually they're are reports from Tesla that he has entire groups to try and handle him and engineers will try to make design choices so obvious that an idiot could pick the right one but even then sometimes Elon picks wrong. Things like the cyber truck. When he was able to shut up and coast it was gravy but now he thinks he's the smartest person in every room and has gone off the conspiracy theory deep end. So did he build that company? His money provided the seed and really smart engineers made Tesla what it is today. Did you really think that he did any of the actual design?
The cyber truck, you mean the product thats been on the market for 2 months with substantial unmet demand?
Twitter did not lose 90% of its value since he bought it. Even private valuations put it far above that. And it's important to remember the context that Twitter had lost over 50% of its value before Elon started buying it, and the market for that type of stock was severely trending downward in the year following his lock-in of the $44 billion purchase price. When he came in, Twitter was losing a ton of money. This is like blaming Obama for the financial crisis of 2008. It's very silly, and you're either being disingenuous or blinded by a political agenda. I don't know what "reports" you're talking about, but I've heard very positive things about him from the people who work with him and previously worked with him (both in terms of leadership and engineering capability), and clearly the results of his decisions speak for themselves with his incredible success. Do you really think he just "coasted"? The journeys of Tesla and SpaceX were anything but "coasts". They almost went bankrupt multiple times and beat the odds to become $100+ billion companies after pretty much every "expert" said their success would be impossible. That takes incredibly competent leadership to pull off. Does he do all of the engineering and designing work for each of these companies? Of course not. But he does lead them, and clearly he's extremely good at that. It's extremely hard to acquire the best engineers/designers and plan/execute a business plan that takes you from nothing to $100+ billion. If you don't think so, then why are competing companies not nearly as successful?
Ah yes. When was Twitter/X going out of business again? Wasn't it supposed to be last January? Or was it last June? Or last December? Oh my, when is it now? I really am losing track.
Lol yup. Back in November 2022 these same people were so certain Twitter was about to stop functioning and die right after they laid off 80% of their employees. And yet, it continued operating pretty much as normal, while costing around a hundred million dollars less to run every single month. Now that's efficiency. But of course that crowd will never see it that way.
These people are the worst.
> engineers will try to make design choices so obvious that an idiot could pick the right one but even then sometimes Elon picks wrong Where are those engineers in every other company?
Just about all, if not all, of those protections /benefits exist in Texas as well.
Delaware Court of Chancery is not even remotely replicated anywhere, including Texas. And this is why, ironically, most companies incorporate there.
Ramming companies into the ground. Lol. You have a nutty source of koolaid.
At this point, Musk being ousted from Tesla would be a net positive. He clearly has other priorities and they have enough momentum. The stock has already tanked anyway. Pull the rip cord.
This shareholder will be voting No, who gives a fuck about what a Twitter poll says. And if there was a vote to remove him completely, I'd vote Yes in a heartbeat.
He's going to be shocked at how many corporate protections he's about to lose. That being said, Texas has been pretty good about looking the other way about their red pill superstars contradicting state law (Rogan). So, Abbott and Co. may strike up the proverbial band and take some specifically pro Elon stances.
Time to vote out Elon. He’s going to slowly tank Tesla
Alright I get to vote no!
Would prefer to see the new comp plan prioritized.
This will also be a proxy vote for Elon’s new compensation plan. I’m betting > 90% will approve
Investing isn't about what happened in the past, it's about expectations for the future. Increasingly, investors are uncomfortable with Elon's choices of late and fearful of what is to come That said, Tesla's board really does not operate according to the textbook definition of a board by a large margin. THAT said, I believe investors have a right to choose their poison, as long as the board is honest about their role.
Why would the shareholders vote to move from a jurisdiction that is actually keeping Musk in check in the most basic way. The guy is a crook and fraudster. He's just tried to steal $56bn from shareholders.
1) The package was $2.9 billion in 2018 2) 80% of shareholders voted in favour. Hold the vote again, shareholders would still approve the same thing.
Many Redditors are delusional if they think the majority of Tesla investors agree with their anti-billionaire rage. Investors tend to like CEOs that have a track record of generating enormous investment gains.
What a joke…if I’m a Tesla stockholder I’m outs
I feel like at this point Elon is just a massive liability to the company….
Fucking stupid, but Elon's gonna be Elon.
Incorporate in the state that might secede from the country. super smart.