The American Business Exodus: Is Texas the Future After Delaware?
On the map, the United States remains a unified federation; however, in the dimension of business logic, we are witnessing America tearing itself into "two nations." In the early winter of 2025, Coinbase, the largest cryptocurrency exchange in the United States, officially initiated the process of moving its registration from Delaware to Texas. In the long narrative of American business history, it is difficult to ignore the sense of decisive pathos behind this decision—it is not merely a change of administrative address, but more like a spiritual "parricide" and "apostasy."
Delaware: Mecca of Corporations
For the past hundred years, Delaware has been the undisputed "Mecca" of American business civilization, the ultimate totem of the industrial era. "Mecca" implies that it is not just a geographical coordinate, but also the end point of a belief. Over 66% of Fortune 500 companies are located on this narrow peninsula of less than two thousand square miles. In the traditional narrative of Wall Street and Silicon Valley, a great company may be born in a garage in California, but its soul (legal entity) must be placed in Delaware. There, you'll find the oldest and most professional Court of Chancery in the United States. For investors and professional managers of that era, Delaware represented an almost religious certainty—there was the most complete fiduciary responsibility, the most predictable precedent library, and a sense of security called the cornerstone of business.
Texas: The New Destination?
But now, conspicuous cracks have already appeared in this rock that carries a century of business belief. Coinbase's departure is not an isolated case. If you spread out the list of this round of migration, you will find that it is filled with the most restless and wildest names of today. Elon Musk was the primary driver of this exodus. The incident was sparked a year ago. In the world-shocking ruling, a Delaware judge ruled to deprive Musk of his $56 billion salary package, which took ten years to earn. Even if he miraculously completed the performance goals that Wall Street originally regarded as a fantasy, and pushed Tesla's market value to a trillion-dollar peak, the judge still used a ruling to tear up this results-based contract on the grounds that "the board of directors was not independent enough." This ruling completely angered the new money in Silicon Valley. Subsequently, the "Iron Man" led Tesla and SpaceX to Texas in the south, like the famous Mayflower. Today, Coinbase, TripAdvisor and other unicorns are also following suit, joining the ranks of the breakout.
Why Are Companies Migrating?
This series of departing backgrounds signals the twilight of an old era. In the past, large companies stayed in Delaware to seek protection, because it represented the maturity and rationality of the rule of law. Now, in order to survive and grow wildly, the top companies believe that they must escape Delaware to be safe. For freedom, there must be bloodshed. In the cruel rules of the business world, freedom is never free. But for Musk and Coinbase, the price tag of this freedom is unbelievably expensive. In the public's general perception, the change of a company's registered address seems to be just a simple administrative procedure—fill out a few forms and change the address. But this is definitely not a "move" that can be settled with a few tens of thousands of dollars in administrative fees. Giants must pay a suffocating bill.
Exorbitant Costs
First, they must hire top law firms. Law firms at the top of the pyramid, such as Wachtell, Sullivan & Cromwell, already have partner rates exceeding $2,000 per hour. Just to draft those hundreds of pages of proxy statements that meet SEC regulatory requirements, the bill will easily exceed $5 million. The second is an expensive election war. In order to convince skeptical institutional shareholders such as BlackRock and Vanguard, the company needs to hire a professional proxy solicitor. For super-cap stocks like Tesla, the "vote-pulling fee" alone is as high as millions of dollars, and it must conduct a roadshow and lobbying campaign for months, just like running for president of the United States. The most deadly is the potential risk of default. The legal team needs to review tens of thousands of commercial contracts day and night, because once the place of registration is changed, the "change of control" clause in many bond agreements may be triggered instantly. In order to obtain a waiver from the creditor, companies often have to pay additional fees. According to market practice, this rate is usually between 0.25% and 0.5% of the total bond amount. For those giants with a large amount of outstanding debt, this means that tens of millions or even hundreds of millions of dollars of cash flow evaporate instantly—this was originally valuable funds that could be used for research and development or repurchase, but now it has become a huge sunk cost.
Is it Worth the Cost?
Since the price is so high, why would they rather "amputate limbs" to leave? The answer lies in the shadow under Delaware's glamorous rule of law. For today's tech giants, Delaware is no longer a safe harbor, but a hunting ground full of traps. Here, a huge, secretive and greedy group lives—The Plaintiffs' Bar. In Wall Street, people jokingly call this a "merger and acquisition tax." According to statistics, at the peak of the past ten years, more than 90% of mergers and acquisitions worth more than $100 million have encountered litigation in Delaware. This group of lawyers does not care about corporate governance. They are like sharks that smell blood. They only need to hold 1 share of the company's stock on weekdays. Once the company issues a major announcement, they immediately file a class action lawsuit on the grounds of "insufficient disclosure." This has already evolved into a standardized "extortion pipeline": file a lawsuit, obstruct the transaction, and force the company to settle. In order not to delay the progress of the transaction, most companies have to pay this "toll", which usually reaches hundreds of millions or even hundreds of millions of dollars. Dell, Activision Blizzard, Match Group... Open Delaware's case collection, and you will find that countless large companies have been "extorted." Here, companies are no longer customers protected by law, but fat sheep that are legally hunted. This kind of absorption reached an absurd peak in the Tesla salary case. When the Delaware judge ruled that Musk's salary plan was invalid, the plaintiff's lawyer team actually filed an application with the court requesting 29.4 million shares of Tesla stock as a reward for winning the case. At the stock price at that time, the value of this fee was as high as $5.6 billion. $5.6 billion, which is enough to buy the largest department store chain in the United States, Macy's, directly. At this moment, the dagger was revealed. This is not a reflection of legal justice, but a blatant plunder of wealth creators. This is what made Musk completely lose heart, and made Coinbase, which was watching from the sidelines, feel a chill down its spine.
Escaping Delaware
The management at Coinbase knows very well that although the knife has not fallen on them yet, it is only a matter of time before they are harvested if they stay in this old world full of "professional plaintiffs" and "sky-high legal fees." The giants have calculated that although the current legal fees, administrative fees, and public relations fees are often in the range of tens of millions or even hundreds of millions, they are only short-term pain. If they continue to stay in Delaware, in this kind of legal environment, losing control of the company and being forced to accept endless legal extortion would be an incurable "cancer." For freedom, there must be bloodshed. The ruler of the old world cannot measure the ambition of the new world. If the exorbitant "ransom fee" only makes Musk feel pain, then the fundamental conflict in the legal logic of Delaware is what makes them feel suffocated. This is not just a debate about legal terms, but the ultimate clash between two business civilizations. Over the past hundred years, Delaware has been able to sit firmly on the commercial iron throne because it has concluded a tacit golden agreement with the American corporate community—the Business Judgment Rule. The subtext is that as long as the board of directors is not corrupt or violates the law, the judge will never interfere in how you do business. This is the ultimate respect for entrepreneurship, and it is also the cornerstone of American commercial prosperity. But in recent years, this yardstick has been deformed by the erosion of time. With the infinite expansion of the weight of institutional investors, Delaware's gavel has begun to slip more and more to the other extreme—the Entire Fairness Standard. This is a term that makes all Silicon Valley founders feel tingly. The subtext is: "I don't care whether you have created a business miracle. As long as the process does not meet my requirements, your success will be in vain." Musk's $56 billion salary, which was written off in one stroke, was a victim of this type of microscopic trial. In that lawsuit, even though Tesla had completed the most insane performance growth in human commercial history, and even though the shareholders had made a lot of money, the Delaware judge still coldly ruled that Musk's salary was invalid. The reason is that the board members have a very good relationship with Musk and the process is not "perfectly independent." This kind of arrogance that "focuses on procedures and neglects results" may be a safe fence for traditional companies like Coca-Cola that are managed by professional managers; but for Coinbase and Tesla, which are new species that rely on the founders themselves to drive exponential growth, this is a deadly shackle. The ruler of the old world can no longer measure the ambition of the new world. Delaware judges can understand the financial statements of steel, oil, and railways, but they find it difficult to understand why Musk's personal IP is worth $50 billion. When Delaware is immersed in moral scrutiny, Texas is practically offering a very ambitious "partnership agreement." This is not an empty phrase "Texas welcomes you." The Texas Business Court officially opened in September 2024. This is not just a new institution, but also a precise strike launched by Texas against Delaware's pain points. It is only responsible for handling cases with large amounts of money. According to the bill, the court has exclusive jurisdiction over commercial disputes exceeding $5 million; and for listed companies, only cases involving more than $10 million are eligible to enter. This means that harassment lawsuits by small shareholders are directly blocked. Even more subversive is the process of appointing judges. Unlike Delaware judges who hold office for up to 12 years and come from legal families, Texas Business Court judges are directly appointed by Governor Abbott and serve for only 2 years. This means that the judicial power and the executive power have reached an unprecedented synergy in the goal of "boosting the economy." If the judge rules against the business environment, he may lose his job after 2 years. The signal that Texas is sending is very straightforward: "Here, we don't teach you how to be human, there is no paternalism. We only protect contracts. As long as you can bring jobs and growth, we will protect you." The "founder models" represented by Coinbase and Musk are no longer willing to bow to the "manager models" represented by Delaware. They are tired of being treated as beasts that must be guarded against. Therefore, they chose to pack their bags and leave that exquisite and suffocating greenhouse, and rush towards the rough but savage wilderness that allows wild growth.
America Drifting
This may not mean the end of Delaware. In the foreseeable future, it will still be the home of Coca-Cola, Walmart, and General Electric. For those "old aristocrats" who seek stable dividends, value ESG ratings, and are accustomed to governance by professional managers, Delaware's sophisticated and cumbersome set of rules remains the best seatbelt. But for another group of people, the air there has become too thin for them to breathe. We are witnessing America tearing itself into "two nations." One represented by Delaware and New York. Here, the focus is on distribution, checks and balances, and political correctness. It is like an exquisite museum, orderly, but revealing an old and tired air. One is represented by Texas and the new frontier. Here, the focus is on growth, efficiency, and even a kind of savage vitality, which is dangerous but full of possibilities. The departure of Coinbase and Musk is just the beginning. They are like canaries in a coal mine, using the most sensitive sense of smell to sense the vibrations in the depths of the earth before anyone else. Of course, this migration is not without risks. The newly established Texas Business Court has not been subjected to the stress test of a major economic crisis, and the power grid there is still fragile in blizzards. No one dares to guarantee that another century-old business legend will definitely be born here in the next hundred years. But this is where business is most fascinating and cruel - it never promises certainty, but it only rewards those who dare to bet on uncertainty. In this big bet on the future, capital voted honestly with its feet. It tells us that when the order of the old world begins to solidify into a shackle, the instinct for innovation always goes to that barren wilderness that allows wild running.
EN
