Twitter Inc. no longer exists as a Delaware entity after the social-media platform merged with Elon Musk’s Nevada-domiciled X Corp. Why Musk picked Nevada over Delaware has experts guessing.
The revelation came from a court document filed April 4, in which attorneys for Musk’s wrote, “Twitter, Inc. has been merged into X Corp. and no longer exists.” X Corp. was formed in Nevada on March 9, according to Nevada’s business portal. Its parent company is X Holdings Corp. A Twitter user calling itself SpacTrader110 noted the Nevada filings before other media outlets picked up on it.
Barron’s reached Musk via email to ask if he could give context regarding the holding company changes and whether he preferred Nevada for any particular reason or if it fit into some other plan regarding X. Musk replied, but just with an “X.” He didn’t return our follow-up seeking clarification. He posted the same message on Twitter early Tuesday morning, after Slate reported on the X merger.
During an interview and Q&A hosted by BBC and Twitter on Tuesday, Musk was asked if there was something more to the move.
“There is something more to it,” Musk said. “Like I said, my goal is to create X, the everything app. That’s the goal. That’s what we’re working towards…Twitter is an accelerant to X, the everything app.”
He added listeners will have to “stay tuned to find out.”
Musk has talked about X before, describing it as his idea for an everything app. So-called Superapps, which combine the functions of apps for social media, mobile payments, and other services, are popular in Asia. A prominent example is
WeChat.
“As with all things Musk, it can be difficult to discern exactly what he is doing,” says Carl Tobias, the Williams Chair in Law at the University of Richmond. “It may be as whimsical as Musk’s fascination with X or with the idea of creating a super app that is ostensibly modeled on WeChat. However, there are concrete practical reasons for Musk to choose Nevada over Delaware.”
Tobias notes Musk may believe the legal system in Nevada is more favorable to him. He also has business in the state, most notably Tesla’s (TSLA) Gigafactory Nevada. He also notes the state is business friendly, with no state income tax and low corporate and property taxes.
Tulane Law School professor Ann M. Lipton told Barron’s that she’s seen speculation that the move is a prelude to Musk’s everything-app, but she points out Twitter was already owned by an X-named entity.
“So to me, it looks more like he just wanted to take the company out of Delaware’s reach,” she said. “For all I know, he simply didn’t want to pay Delaware franchise fees.”
Lipton notes Nevada has a reputation for more relaxed corporate law that doesn’t impose “very stringent fiduciary standards on corporate officers and directors.”
“As a result, it’s developed a kind of market reputation as a welcoming place for flightier kinds of companies,” she says. “And Delaware, unlike Nevada, has an extremely knowledgeable and expert judiciary to adjudicate disputes, so that the bench expects a certain level of professionalism by corporate officers and directors; Nevada does not have that kind of judiciary, and not that many cases, so it’s more unpredictable.”
Boston College Law School professor Brian JM Quinn echoed the sentiment, guessing the difference may have to do with the court 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 sophisticated judiciary that Delaware does in the Chancery Court,” Quinn added. “I suspect he might feel that he would fare better in Nevada than in Delaware where there chancellors seemed none too impressed by him.”
Write to Connor Smith at [email protected]
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