Another Magnificent Seven Contemplates Texas: Will Meta Pursue Re-Domiciling in Texas After the Tripadvisor Decision?

Dissatisfaction with Delaware Rulings. In recent years, a growing number of Delaware corporations have expressed concern about the willingness of Delaware courts to scrutinize, and at times invalidate, corporate transactions — particularly when they involve a “controlling stockholder.” For example, in 2024 the Court of Chancery invalidated Tesla, Inc.’s (NASDAQ: TSLA) $55.8 billion equity compensation package for Elon Musk.⁴ After publicly denouncing the decision, Musk successfully moved to reincorporate Tesla and Space Exploration Technologies Corp. from Delaware to Texas in 2024. As the news about Meta and TripAdvisor illustrates, other companies with powerful founder/CEOs appear to be contemplating or actively pursuing re-domiciles out of Delaware as well.⁵ The Tripadvisor decision could accelerate this trend.

The Tripadvisor Ruling. Minority stockholders of Tripadvisor brought suit against Tripadvisor’s board and controlling stockholder challenging the decision to re-domicile Tripadvisor to Nevada from Delaware. The stockholders alleged that Tripadvisor’s directors and controlling stockholder breached their fiduciary duties by approving the re-domicile, which they alleged to be a self-interested decision that was motivated (in part) by the perception that Nevada law afforded controllers, directors, and officers greater protection from breach-of-fiduciary-duty claims.⁶ The minority stockholders argued that this self-interested decision should be subject to the entire fairness standard of judicial review, the strictest standard Delaware courts impose to evaluate board decisions.⁷ The Chancery Court agreed, holding that potential insulation from litigation could conceivably confer a “non-ratable benefit” to the controller, and thus denied dismissal of the stockholders’ claims.⁸

While denials of motions to dismiss are typically not appealable, the Delaware Supreme Court granted an interlocutory review to resolve the “narrow” issue of “which standard of review governs the decisions to approve” a corporate re-domicile.⁹ On February 4, 2025, the Delaware Supreme Court reversed the trial court’s ruling and held the business judgment rule (and its protective presumption) should apply to Tripadvisor’s re-domicile decision.¹⁰ According to the court, the alleged benefit of the move — namely, preventing unspecified future litigation and liabilities — was too speculative to warrant entire fairness review. The court summarized: “[T]he hypothetical and contingent impact of Nevada law on unspecified corporate actions that may or may not occur in the future is too speculative to constitute a material, non-ratable benefit triggering entire fairness review.”¹¹ The decision to apply a deferential business judgment rule review means that corporations can leave Delaware without probing judicial inquiries into the Board’s business decision — at least in instances where the conversion decision is not “made to avoid any existing or threatened litigation or [was] made in contemplation of any particular transaction.”¹²

More to Come? It is too soon to predict how strong the trend to re-domicile out of Delaware may become following Tripadvisor. Delaware Governor Matt Meyer recently promised that he will work to “lure companies back” to Delaware.¹³ An example of such activity might be seen in Delaware’s response to corporate outcry following the Court of Chancery’s decision in West Palm Beach Firefighters’ Pension Fund v. Moelis & Co., which invalidated certain provisions of a stockholder agreement with a controlling stockholder.¹⁴ After the decision was issued, the Delaware corporate bar and Delaware General Assembly demonstrated their willingness to address such concerns by acting quickly to amend the Delaware General Corporate Law to statutorily reverse the Moelis decision.¹⁵

Texas’ Intrigue as a Potential Corporate Domicile. Texas’ appeal as a jurisdiction to which a corporation may choose to re-domicile derives in part from the establishment of Texas’ specialized Business Courts, which began operations in September 2024.  Some believe that the new Business Courts will develop the sophistication to quickly and predictably handle corporate disputes and provide a more company-friendly venue. Time will tell whether this is so. Given Delaware’s historical dominance as the domicile of corporate incorporation, other states, including Texas, have far less established precedent to determine with certainty whether the benefits of reincorporation will outweigh the costs. Moreover, the desirability of trying complex commercial disputes to a jury, which is available in the Texas Business Courts but not in the Court of Chancery, could be a significant factor as companies weigh the pros and cons of domestication.¹⁶

Our corporate lawyers have extensive experience in corporate jurisdictions and can advise on questions relating to the pros and cons of potential re-domiciling, which should be approached on a case-by-case basis and with appropriate involvement of local counsel.

Vinson & Elkins LLP, a leading international corporate firm, was founded in Texas in 1917.

¹ Emily Glazer et al., Meta in Talks to Reincorporate in Texas or Another State, Exit Delaware, The Wall Street Journal, January 31, 2025.

² Maffei v. Palkon, 2025 WL 384054, at *1-30 (Del. Feb. 4, 2025).

³ Id., at *1-30.

⁴ Tornetta v. Musk, 310 A.3d 430 (Del. Ch. 2024).

⁵ Theo Francis & Erin Mulvaney, Elon Musk Isn’t the Only Billionaire Fighting Delaware, The Wall Street Journal, February 11, 2024; Katie Balevic, Delaware governor tells BI things may ‘need to change’ as companies threaten to leave the state, Business Insider, February 2, 2025.

⁶ Maffei, 2025 WL 384054, at *1-15.

⁷ Id. at *1-30.

⁸ Palkon v. Maffei, 311 A.3d 255, 270-284 (Del. Ch. 2024), cert. denied, No. 2023-0449-JTL, 2024 WL 1211688 (Del. Ch. Mar. 21, 2024), and rev’d, No. 125, 2024, 2025 WL 384054 (Del. Feb. 4, 2025).

⁹ Maffei, 2025 WL 384054, at *1.

¹⁰ Id. at *15-30.

¹¹ Id. at *26.

¹² Id.

¹³ Balevic, supra note 5.

¹⁴ W. Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 311 A.3d 809 (Del. Ch. 2024).

¹⁵ Mark Lebovitch, The Drama Around Moelis and New DGCL Section 122(18) Just Got Hotter, The Columbia Law School Blue Sky Blog, November 18, 2024, https://clsbluesky.law.columbia.edu/2024/11/18/the-drama-around-moelis-and-new-dgcl-section-12218-just-got-hotter/.

¹⁶ Shane Goodwin, Texas vs. Delaware: Which State Will Shape the Future of Corporate Law?, The Columbia Law School Blue Sky Blog, Jan 15, 2025, https://clsbluesky.law.columbia.edu/2025/01/15/texas-vs-delaware-which-state-will-shape-the-future-of-corporate-law/.