Delaware’s hold on businesses is weakening. CEOs, following Elon Musk’s lead, are leaving the state’s Chancery Court and reincorporating elsewhere. This trend is now called “Dexit.”
The ‘Dexit’ Exodus
Companies like Meta, Dropbox, Pershing Square, Trade Desk, Fidelity National Financial, and Sonoma Pharmaceuticals are considering leaving Delaware.
They might join Musk’s companies – Tesla, SpaceX, Boring Company, Neuralink, and X, which have already left.
The trend started after Delaware Judge Kathaleen McCormick rejected Musk’s 2018 pay package, even though all its goals were met.
Musk’s Warning
Musk has been clear about his dislike for Delaware’s courts. In January 2024, he posted on X,
“Never incorporate your company in the state of Delaware.”
His frustration grew when Judge McCormick ignored Tesla shareholders’ decision to approve his pay package during the 2024 Annual Meeting.
Tesla shareholders voted to move the company’s incorporation to Texas instead of Delaware.
Experts Weigh In
University of Virginia Law School professor Michal Barzuza said,
“I think there is a lot of pressure on Delaware, And I think the more moving, the easier it becomes for others to move.”
Pershing Square CEO Bill Ackman announced on X that his company is moving to Nevada. He wrote,
“We are reincorporating our management company in Nevada for the same reason. Top law firms are recommending Nevada and Texas over Delaware,”
Coinbase’s chief legal officer, Paul Grewal, also shared concerns. He said,
“I’ve tried cases to Delaware juries, enjoyed friendships with Delaware judges, and taught classes to Delaware lawyers. The Hotel DuPont is a familiar stay, and I’ve bought too many shirts and ties to count at Wright & Simon in Wilmington. And so I share this with affection, not animosity: Delaware is at serious risk of losing its standing as the leading state of incorporation for American companies,”
The Stakes for Delaware
For about 100 years, Delaware has attracted companies with business-friendly laws, a specialized court, and easy filing processes. Over two-thirds of Fortune 500 companies are incorporated there.
Incorporation fees are a major part of Delaware’s economy. In 2024, these fees generated $1.33 billion for the state.
Now, states like Nevada, Texas, and Wyoming are stepping up with their own business-friendly policies to compete.
Delaware’s Response
New Delaware Governor Matt Meyer is addressing complaints about the Chancery Court.
He told CNBC,
“I’m hearing something similar from a number of Delaware companies and attorneys. That they feel like they get the same judge every time when they come to Delaware business court, and they don’t feel like they are getting a fair hearing,”
Delaware’s position as the top state for businesses is at risk as more companies think about leaving.
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