Despite Coinbase departure, only 28 companies have left Delaware this year

Elon Musk has been advocating for companies to abandon Delaware in favor of more business-friendly states, following his own ventures, Tesla and SpaceX. Recently, Coinbase made headlines by announcing its decision to shift its state of incorporation from Delaware to Texas. Despite Musk's claims that Delaware is experiencing a significant outflow of businesses, current statistics paint a different picture. According to the Delaware Secretary of State's office, only 28 companies have re-incorporated outside of Delaware this year. In stark contrast, the state saw the formation of 249,214 new entities in 2023, reflecting a robust 14% increase compared to the same timeframe in 2022. Musk's push for relocation follows a Delaware Chancery Court ruling that mandated Tesla to revoke a controversial pay package worth approximately $56 billion in options. The case is currently under appeal with the Delaware State Supreme Court. Notably, venture capital firm Andreessen Horowitz, which has been involved in both Musk's Twitter acquisition and Coinbase's funding, recently criticized Delaware's legal landscape, citing increased judicial uncertainty. The firm has since opted to incorporate in Nevada. Aside from Coinbase, other companies that have announced their move from Delaware this year include Dillard's, Dropbox, Roblox, and fintech company Affirm, founded by Max Levchin, a prominent figure in the so-called PayPal mafia alongside Musk. Most of these companies have chosen Nevada as their new home, while Coinbase and Dillard's are relocating to Texas, and Simon Property Group has opted for Indiana. Trump Media & Technology, associated with former President Donald Trump, is moving to Florida. Experts like Benjamin Edwards from the University of Nevada Las Vegas highlight Nevada's appeal due to its clear corporate liability laws. According to Edwards, the state specifies that executives or board members will only be held accountable if they knowingly engage in wrongful actions. Despite the recent relocations, Delaware remains a dominant player in the incorporation landscape. Last year, the state was home to over 2.1 million legal entities and accounted for 81.4% of U.S. IPOs, a rise from 79% in the previous year. Edwards anticipates that Delaware's market share will stabilize around 75% this year due to its well-established corporate code and experienced judiciary. Delaware Secretary of State Charuni Patibanda-Sanchez emphasized the state's long-standing commitment to fostering a business-friendly environment, which balances the interests of executives and shareholders. In a proactive move, Meta had considered leaving Delaware but ultimately decided to remain after the state legislature expedited changes to corporate laws, influenced by Democratic Governor Matt Meyer. This legislative effort was supported by legal experts who had previously represented both Meta and Musk.