IN-DEPTH: The 'Dexit' Dilemma
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When Elon Musk announced plans to move Tesla out of Delaware for Texas last year — following similar moves by companies to redomicile in Nevada — it fueled a debate about the merits of leaving the state long considered the gold standard of U.S. corporate law.
Yet despite the headlines, the pace of departures remains more trickle than flood, led by tech companies with heavy insider ownership and often against the wishes of minority shareholders.
According to Diligent Market Intelligence (DMI) data, at least nine public companies have held shareholder votes to reincorporate in Nevada or Texas in the first six months of 2025, up from seven in all of 2024 and five in 2023. Notable names include Tripadvisor, Affirm Holdings, Sphere Entertainment and The Trade Desk.
While many of these companies reference the annual “tax” they pay to Delaware as a reason to exit, one of the key drivers is understood to be legal exposure. “This is not about tax,” said Jeroen van Kwawegen, a shareholder rights attorney at Bernstein Litowitz Berger & Grossmann LLP. “This is about avoiding accountability. It’s about shifting the balance of power from shareholders to management.”
The tug-of-war over state charters highlights a deeper question about the balance between accountability and autonomy in U.S. boardrooms with Delaware at the heart of that debate for more than a century.
Delaware’s enduring influence
Delaware's dominance dates to the early 20th century, when a combination of flexible statutes, a specialized judiciary and favorable franchise taxes lured thousands of companies. Delaware’s Court of Chancery, with case law dating from 1792, built its reputation on speed, equity-focused judgments, and an aversion to jury trials and became synonymous with predictable outcomes and modern governance.
But that predictability has been tested in recent years. In 2024, the state’s Court of Chancery voided Elon Musk’s $55-billion pay package in Tornetta v. Musk, a ruling that cast doubt on Delaware’s deference to founder-led boards. For some executives, the message was clear: Delaware could no longer be relied upon to rubber-stamp aggressive governance structures.
Other states have seized on that uncertainty. Nevada has codified the business judgment rule and eliminated most forms of director liability short of fraud in a bid to attract more companies. Texas recently made it nearly impossible to bring shareholder derivative suits unless plaintiffs hold at least one-third of a company’s shares.
“Even as a shareholder, there’s very little you can do,” said Michal Barzuza, professor at the University of Virginia School of Law. “Nevada has no fiduciary duties. The bars to litigation are so high that there’s very little accountability.”
Such legal protections have attracted some CEOs and founders frustrated with what they see as Delaware’s increasingly interventionist courts. Silicon Valley venture firm Andreessen Horowitz was among the highest-profile converts, announcing in 2025 that it had reincorporated in Nevada and urging portfolio companies to follow. “What judges have given, they can take away,” the firm wrote in a blog post, praising Nevada for offering more predictability and cost control, especially for technology companies. “Litigation – even where successfully defeated – is costly and time consuming, particularly for the tech startups that need every penny they raise to build innovative companies.”
Shareholder opposition
Redomiciling may appeal to some founders and directors, but minority shareholders have regularly opposed such moves. At Tripadvisor's annual meeting in 2023, more than 90% of minority investors opposed reincorporating in Nevada, though the proposal passed with 67% backing thanks to the voting control of Liberty Media’s Greg Maffei, according to voting results and as cited in lawsuits that tried but failed to block the move. Other departing companies like The Trade Desk, Affirm and Sphere Entertainment were also able to overcome opposition by minority shareholders due to large stakes by founders and dual-class share structures.
And activist investors who spoke with DMI argue that abandoning Delaware’s standards won’t put public companies off limits to shareholder action.
“Some states like Nevada and Texas may have more corporate-friendly statutes, but there are workarounds, noted Jim Chadwick, a veteran activist investor and portfolio manager with Ancora Alternatives. “And every public company holds an annual meeting no matter what state it’s incorporated in.”
It also is considered by many to send a message of hostility to shareholder oversight that could draw more, not less, activist pressure.
One west coast activist who asked to remain anonymous warned that any board of directors supporting such a move would serve as a “hot stick in the eye of the shareholders” who elected them. “It’s a window into the board's governance and culture; actions speak louder than words. We’d certainly see that as a tipping point.”
Weathering the storm
Delaware’s reputation, while bruised, remains a powerful draw. Almost 67% of Fortune 500 companies remain incorporated in the state, while 81% of U.S.-based initial public offerings in 2024 chose the state as their corporate home, according to a recent report published by the Delaware Division of Corporations.
Even as some companies consider exiting, others are returning. At an April special meeting, Daktronics shareholders approved its change of domicile from South Dakota to Delaware with the electronic signmaker pointing to the state's business-friendly legal framework and strong shareholder rights and protections. In fact, the move to Delaware was opposed by some shareholders, including activist Alta Fox Capital Management on grounds it would help to ‘‘entrench’’ the company’s board and management by eliminating cumulative voting.
At another April EGM, Uniti Group secured 92% backing for its plan to move from Maryland to Delaware. Five other companies held a vote to move to Delaware last year.
Delaware has weathered storms before. In the 1980s, backlash over director liability and poison pills forced quick reforms. But at that time rival states were still playing by roughly the same rules. Today is different, noted Barzuza, with Nevada and Texas offering boards a viable escape route from Delaware’s scrutiny. “Back in the 1980s other states’ laws were still mostly similar. What’s new today is that Nevada and Texas offer far weaker standards. That makes the equilibrium more fragile, and the future harder to predict.”
