Twitter Inc
After its merger with Elon Musk’s Nevada-based X Corp., the social media platform Twitter Inc. no longer operates as an entity with a domicile in the state of Delaware. The reason Elon Musk chose Nevada over Delaware is a mystery to industry insiders.
The information was found in a court document that was submitted on April 4, and it read as follows: “Twitter, Inc. has been merged into X Corp. and no longer exists.” The disclosure happened as a result of the document. According to Nevada’s business portal, X Corporation was established on March 9 in the state of Nevada. X Holdings Corp. is the corporation that operates as its parent. Before other media sources picked up on it, a Twitter user who goes by the name SpacTrader110 brought attention to the Nevada filings.
In an email, Barron’s asked Musk whether he chose Nevada for any particular reason and whether the holding company changes fit into any other plan about X. Musk responded that he liked Nevada for no particular reason and that the adjustments did fit into any other plan for X. Musk did respond, but all he did was write an “X.” Our subsequent inquiry to him for an explanation was ignored by him. After reading an article on Slate that discussed the X merger, he sent the same message on Twitter quite early on Tuesday morning.
“There is something more to it,” Musk stated. “As I’ve mentioned before, my objective is to design X, the software that does everything. That should be the target. That is the goal that we are striving to achieve…Twitter acts as a catalyst for X, which is an app for everything.
He continued by saying that the audience should “stay tuned to find out.”
Musk has previously discussed X, which he has referred to as his concept for an all-encompassing app. Apps that integrate the features of many others, such as those for social media, mobile payments, and other services, are known as “Super apps,” and they are quite popular in Asia. WeChat is a good illustration of this principle?
According to Carl Tobias, who holds the Williams Chair in Law at the University of Richmond, “It can be difficult to discern exactly what he is doing,” and this is true of everything that Musk does. “It may be as frivolous as Musk’s fascination with X or with the concept of creating a super app that is apparently modeled on WeChat. Both of these things come to mind as possible explanations. Nevertheless, there are a number of tangible and practical reasons for Musk to select Nevada rather than Delaware.
Tobias notes Musk might have the impression that the legal system in Nevada is more amenable to his interests. In addition, he is involved in local business, the most notable of which is Tesla’s (NASDAQ:TSLA) Gigafactory Nevada. He also mentions that the state does not impose a tax on individual income and that both corporate and property taxes are kept at a low rate.
Ann M. Lipton, a professor at Tulane Law School, told Barron’s that she has seen conjecture that the move is a forerunner to Musk’s everything-app. However, she notes that Twitter was already controlled by an X-named business before the rumors began to circulate.
She stated that it appears more likely to her that he just desired to remove the corporation beyond Delaware’s jurisdiction. “For all I know, he simply didn’t want to pay the Delaware franchise fees.”
Lipton points out that Nevada is known for having corporate law that is known to be more lenient and it does not impose “very stringent fiduciary standards on corporate officers and directors.”
“As a direct consequence of this, it has grown a kind of market reputation as a welcoming place for companies that are more ephemeral in nature,” she explains. “And Delaware, in contrast to Nevada, has a very knowledgeable and expert judiciary to adjudicate disputes, which means that the bench expects a certain level of professionalism from corporate officers and directors; Nevada does not have that kind of judiciary, and there are not that many cases, so it is more unpredictable.”
The sentiment was echoed by Professor Brian JM Quinn of the Boston College Law School. He speculated that the discrepancy may be related to the different judicial systems.
“Although Nevada has, for years, attempted to set itself up as competition for Delaware re-incorporations, it just doesn’t have the level of the sophisticated judiciary that Delaware does in the Chancery Court,” Quinn noted. “Although Nevada has attempted to set itself up as competition for Delaware re incorporations.” “I have a sneaking suspicion that he might believe that he would fare better in Nevada than in Delaware, where the chancellors did not appear to be overly impressed by him,”
Featured Image: Unsplash @ Alexander Shatov
