|

Pershing Square to Abandon Delaware Incorporation, Meta May Follow

Billionaire Bill Ackman is making Pershing the latest high-profile company to depart longtime corporate haven Delaware.

Photo of Bill Ackman
Photo by Senate Democrats via CC BY 2.0

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

The Pershing Square hedge fund, named after a Manhattan neighborhood, is heading west, at least on paper.

Billionaire Bill Ackman said Saturday the firm, which has re-entered the ranks of the world’s top 20 hedge funds, plans to reincorporate in Nevada, making it the latest high-profile company to depart longtime corporate haven Delaware. Mark Zuckerberg’s Meta is reportedly considering following suit. 

What Reincorporates in Vegas…

For a century, Delaware has been the go-to place for companies to file for incorporation in the United States, thanks to corporate-friendly regulations and the Court of Chancery, its specialized court system for handling business cases. Over two-thirds of the companies on the Fortune 500, including Google-owner Alphabet and e-commerce giant Amazon, are registered in Delaware.

But the state’s appeal — for corporations, at least — began to wane last year because of that special court. A series of rulings — including one that struck down Tesla CEO Elon Musk’s $55 billion compensation package in a shareholder lawsuit last year — tilted the scales towards empowering investors. Law firm Wilson Sonsini noted last year that legal rulings, and “increasingly active, and successful, plaintiffs” made it necessary for companies to plan for “gotcha litigation.” Musk, for his part, moved Tesla’s incorporation to Texas and encouraged other CEOs to leave the First State in the months following the February 2024 ruling against him. Other states have noticed an opportunity:

  • “Top law firms are recommending Nevada and Texas over Delaware,” said Ackman, in a tweet announcing Pershing’s reincorporation. Musk moved his Neuralink to Nevada last year — the state’s courts are seen as friendlier to business because they operate on the presumption that directors and officers operate in good faith, whereas the burden of proof can fall on the defendant in some cases in Delaware.
  • Texas, meanwhile, has its own newly formed Texas Business Courts meant to rival Delaware’s Court of Chancery system. The Wall Street Journal reported Friday that Mark Zuckerberg’s Meta has held internal talks about moving its incorporation to the Lone Star State, joining Tesla and Musk’s SpaceX.

A Reason to Fight: Delaware, home to just a million people, rakes in billions from its vaunted status as America’s incorporation HQ. Corporate franchise taxes and business fees brought in $1.9 billion in 2022, equal to 28% of the state budget. It’s losing ground, fast, however: the state’s official website says 80% of all US initial public offerings in 2023 were registered in Delaware. In 2020, the site said that number was 93%.