By Emily Glazer, Berber Jin and Meghan Bobrowsky
First Mark Zuckerberg moved Meta's trust and safety workers to Texas. Now, he is exploring moving his social-media giant's legal residence to the Lone Star state.
Meta Platforms is discussing moving its incorporation from Delaware, where most big U.S. companies are legally housed, people familiar with the matter said. Texas has billed itself as a better destination for companies such as Meta with controlling shareholders like Zuckerberg. The paperwork change wouldn't relocate its corporate headquarters.
The company has talked to Texas officials about the possible changes, one of the people said. It has also considered reincorporating in other states, another person said.
A Meta spokesman said there are no plans to move the company's corporate headquarters from California. He declined to comment further.
Elon Musk has said he reincorporated several of his companies outside of Delaware, including Tesla and SpaceX to Texas and startup Neuralink to Nevada. Musk's decision to exit from the state came after a Delaware court ordered him to give up a compensation package valued at $55.8 billion.
Although a majority of Fortune 500 companies incorporate in Delaware, other corporations have also looked closely at similar moves in the last year, often following shareholder-driven litigation.
Executives and controlling shareholders of public companies have long expressed frustration with the Delaware Court of Chancery, which has become home to a thriving shareholder plaintiffs' bar. The big companies that have reincorporated elsewhere have tended to have a dominant owner potentially affected by recent Delaware decisions.
On Friday, online-storage service Dropbox said it had gained approval from majority shareholders to move its incorporation from Delaware to Nevada, according to a securities filing.
Companies' headquarters and operations are often in different states than their legal domicile. Separately, Meta also ended fact-checking on Facebook and Instagram in favor of a so-called Community Notes system, one of a number of steps Zuckerberg, Meta's CEO, has taken as he seeks to build ties with the Trump administration. Musk applauded Meta's fact-checking decision.
The talks between Meta and Texas predate the new administration, the people said. Meta has been incorporated in Delaware since 2004 -- well before its 2012 initial public offering. The company is considering the pros and cons of legal setups outside the state and how other companies fared when they reincorporated, the people said.
About two-thirds of S&P 500 companies -- regardless of where they are actually based -- are incorporated in Delaware, largely because the tiny state has specialized courts that handle business matters and stacks of legal precedents for addressing disputes. In recent years, controlling stockholders of publicly traded companies incorporated in Delaware have chafed at rulings bolstering the rights of minority stockholders.
Meta, Zuckerberg and some of the company's current and former board members are facing a lawsuit in Delaware that was brought by shareholders in the wake of the Cambridge Analytica scandal. The case is set to go to trial in April, and the court last week granted a request from plaintiffs to depose Zuckerberg.
Current litigation is unlikely to get moved out of Delaware with any reincorporation, legal scholars say. But any lawsuit filed after a reincorporation would play out in the new state.
Texas' effort to woo corporate registrations have included setting up the state's own specialized business court system. More than two dozen states have established dedicated business courts, including four since 2019.
It remains unclear whether the Lone Star state can match Delaware's influence. Attorneys say it will take time, at least, to rival the state's legal expertise and the sheer scope of its many precedents.
It also isn't clear yet how well Texas or other states will reassure investors -- if courts appear too management friendly, markets may eventually penalize companies that relocate.
"The Texas state government is trying to send out signals that the Texas state courts will be more friendly to businesses than the Delaware court has been," said Stephen Bainbridge, a law professor at the University of California, Los Angeles. "But there's no guarantee that that's going to happen."
Delaware, which works to balance the demands of investors and managers, isn't taking competition from Texas and other states lightly. Last year, Delaware's legislature made it easier for big shareholders to use stockholder agreements to assume powers normally held by a company's board. The Delaware Chancery Court also ruled in Meta's favor in April, dismissing a case that argued the company had to consider societal impacts in addition to chasing profits.
Texas is the legal home of four S&P 500 companies other than Tesla, including Southwest Airlines, CenterPoint Energy, Atmos Energy and Camden Property Trust, S&P Global Market Intelligence data show.
One of the biggest advantages Delaware has: extensive precedents on nearly every facet of corporate law, giving boards and attorneys a better sense of likely outcomes and how to make their cases. Most other states follow Delaware's lead to one degree or another -- but a variety of differences can lead to unpredictable outcomes, legal scholars say.
--Theo Francis contributed to this article.
Write to Emily Glazer at Emily.Glazer@wsj.com, Berber Jin at berber.jin@wsj.com and Meghan Bobrowsky at meghan.bobrowsky@wsj.com
(END) Dow Jones Newswires
January 31, 2025 17:18 ET (22:18 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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