Delaware’s status as the nation’s corporate capital is fading, as major departures and mounting criticism of its judiciary put the state under scrutiny.
On CNBC’s Squawk Box on Wednesday, anchors Joe Kernen and Andrew Ross Sorkin pressed Delaware Gov. Matt Meyer on whether his administration is jeopardizing the state’s corporate law dominance. Meyer dismissed concerns, leaving the hosts stunned by his responses.
Sorkin opened the interview asking: “Our next guest has seen his state lose some high-profile incorporations. The biggest one: Tesla, when Elon Musk left for Texas. What is the state of play here?”
The Democrat governor downplayed the shift, claiming that Delaware still hosts over 2.2 million registered entities. While downplaying concerns as little more than market “chatter,” Meyer added confidently: “We’ve been the preeminent corporate franchise for over a hundred years, and it remains that way.”
Kernen and Sorkin pushed back, noting venture capital firms are steering startups away from Delaware. “You changed the law,” Sorkin told Meyer. “That was not something you do regularly.”
The biggest blow came when Elon Musk announced Tesla would move its incorporation from Delaware to Texas, sparking fresh concern in corporate and venture circles. Once the gold standard, Delaware’s Court of Chancery is now viewed by many as favoring plaintiff law firms that are entrenched in state politics.
The tipping point came when Delaware Chancellor Kathaleen McCormick voided Musk’s $56 billion Tesla pay package as “unfair,” despite board and shareholder approval, while granting the plaintiff’s law firm $345 million in fees. Critics argue that the ruling demonstrates Delaware courts are becoming increasingly willing to override contracts and corporate norms.
“Shareholder democracy is one thing,” Sorkin said. “But if you’re management or a founder, you now look at Delaware and wonder if the courts are really on your side.”
The backlash has driven not only Tesla but also tech firms and funds to consider Texas and Nevada. Gov. Meyer argued that Delaware updates its corporate laws yearly to maintain stability, but critics see this year’s unanimous Senate Bill 21 as a direct response to the Tesla case.
Sorkin pressed Meyer on this point, noting: “If I were to FOIA [Freedom of Information Act] all of the communications between the political class in Delaware that voted to change the law, the word ‘Elon’ and ‘Tesla’ would be in all of the emails.”
Meyer denied it outright: “It wasn’t in any of my emails. It was about creating predictability … there was a gray in the law that was hampering corporate decision-making.”
Kernen then suggested the real motive was clear: “To correct what was kind of a mistake for what the end result was, right? I can’t see any other legal reason other than he makes too much money for a court to try to violate a contract entered into by the CEO.”
The corporate migration debate comes amid broader legal risks in Delaware, where Fox News paid $787 million to Dominion and Newsmax reached costly defamation settlements over 2020 election coverage. Both outlets accused Superior Court Judge Eric Davis, a Biden ally, of denying them standard libel defenses.
Asked who Delaware’s main rival is, Gov. Meyer pointed to overseas markets—an answer CNBC anchors laughed off. With Texas openly marketing itself as a friendlier destination for entrepreneurs and Nevada long offering less regulatory oversight, Delaware faces competition on multiple fronts that are domestic, not international.
Major public companies have been leaving Delaware in record numbers, a movement known as “Dexit.” The once unthinkable — companies abandoning the First State en masse — is now a reality.
Other companies that have left Delaware include retail giant Dillard’s; online players like Tripadvisor, Roblox, MercadoLibre, and Dropbox; financial player Affirm Holdings; shopping mall giant Simon Property Group; hedge funds Andreessen Horowitz and Pershing Square; media players AMC Networks, Madison Square Garden Sports, and Trump Media & Technology Group; among many others.
