DExit Was Deceit Created By an Upset Elon Musk
Elon Musk lost his Tesla CEO pay package lawsuit in the Delaware Court of Chancery worth tens of billions of dollars. He is appealing it to the Delaware Supreme Court. However he wasted no time deriding Delaware’s esteemed judiciary. Many Delaware business leaders and elected officials were concerned this would prompt a mass exodus of companies incorporated in Delaware to shift domicile to Texas or Nevada. This fear was coined “DExit”, a blend of Delaware and Exit.
What Is DExit?
DExit is a term used to describe the idea that companies would leave Delaware to incorporate in other states after Elon Musk lost his CEO pay package lawsuit in Delaware. Musk decided to reincorporate in Texas, and encouraged other companies to leave Delaware as well.
Delaware has a balanced approach to management and owner rights in corporate law, that grew out of a politically balanced court system and super responsive general assembly to the needs of the Delaware bar. Delaware corporate law is often the only corporate law taught in law schools. The Delaware Court of Chancery is the nation’s preeminent trial court for business disputes.
Did DExit Happen?
It turns out very few companies up and left Delaware for Texas. Of course the ones that Elon Musk controls through investment interests left if they could. This illusion of a mass exodus coming was a ruse by Elon Musk’s lobbies and public relations people to scare the Delaware legislature into thinking the golden goose (Delaware corporate franchise) might be at risk of flying south to Texas. Both Nevada and Texas have more management friendly laws, because their legislators have been trying to win the race to the bottom, of corporate law.
Not to pass up on a moment of weakness, the Delaware attorneys on the corporate defense bar jumped at the opportunity to create a scare tactic of companies leaving coupled with powerful lobbies to ramrod through the general assembly with the assistance of the governor a package of Delaware corporate law amendments to strip out a number of shareholder friendly doctrines that had emerged.
The real story here is not companies leaving Delaware, because (1) very few left and (2) Delaware is still forming close to 40,000 business entities per month. Rather the story is Delaware’s susceptibility to political influence to change its laws in response to perceived public pressure. Delaware State Senate Bill 21 (SB-21) was a new set of laws enacted in 2025 in Delaware to create more hurdles to shareholder lawsuits.
Turns out the Delaware brand was not tarnished by Musk’s decision or actions. Delaware remains the premier jurisdiction for incorporating, especially for publicly traded companies.
