After Elon Musk’s Delaware exit, state lawmakers weigh bill to overhaul corporate law
Tesla CEO Elon Musk looks on as US President Donald Trump speaks to the press as they stand next to a Tesla vehicle on the South Portico of the White House on March 11, 2025 in Washington, DC.
Mandel Ngan | AFP | Getty Images
Tesla CEO Elon Musk turned Delaware’s corporate law into a hot-button topic last year after a judge there ruled that his $56 billion pay package from 2018 was illegally granted and should be rescinded.
In social media posts, Musk smeared the judge and became an outspoken critic of Delaware’s judiciary, moving the site of incorporation for Tesla and his other companies out of the state while encouraging others to follow suit. Dropbox moved its site of incorporation to Nevada, and Bill Ackman said his Pershing Square Capital Management would exit Delaware. Meta and Walmart are reportedly considering leaving.
After a flurry of such announcements, Delaware’s Senate Majority Leader Bryan Townsend, a corporate attorney by trade and former clerk for Delaware’s Court of Chancery, began looking into the matter with fellow elected leaders. He then moved to sponsor a bill, known as SB 21, aimed at making Delaware a more attractive state for businesses.
On Thursday, the state Senate voted to pass an amended version of SB 21. If it passes Delaware’s House of Representatives, in a vote expected next week, and gets signed by the governor, the bill would change the state’s corporate law. Notably, it would alter how companies can use independent directors and other officials to ensure deals they’ve made will pass muster in court, and limit the records that shareholders can obtain from companies when investigating possible wrongdoing.
Townsend told CNBC that the aim of the bill is to ensure Delaware corporate law is clearer and more predictable, and that the state remains attractive to both investors and corporate leaders.
Many institutional investors, legal scholars and shareholders’ attorneys have opposed the bill, arguing that it would harm minority shareholders and allow boards and executives to make decisions based on their own interests rather than for the broader investor base.
The International Corporate Governance Network (ICGN), consisting of investors with more than $90 trillion in combined assets under management, spoke out against the bill on Tuesday. According to its website, ICGN members include Alliance Bernstein, the Swedish AP funds, BlackRock, CalPERS, CalSTRS, Franklin Templeton, Norges and Vanguard.
ICGN CEO Jen Sisson cautioned in a letter sent to Delaware state senators and representatives that SB 21 “will be detrimental to shareholder rights, with potentially significant negative implications for long-term returns for investors, including people saving for their retirements, current retirees and other individuals investing their savings.”
Sisson also said the bill would “reduce judicial oversight” and diminish shareholders’ trust that they can “seek remedies through litigation, when necessary.”
The anti-Delaware sentiment has at least some political motivations. While aligning themselves with President Donald Trump, executives like Musk and Ackman are trying to publicly undermine what they describe as “activist judges” who have issued rulings they found disagreeable.
Musk also has a lot of money potentially at stake. If adopted, legal scholars have argued, the new law could help the world’s richest person in his effort to reverse the court’s order in January 2024 that rescinded his mammoth pay package.
Unusual rollout
In her ruling, Delaware Chancery Court Judge Kathaleen McCormick said Musk’s compensation plan had been inappropriately set by Tesla’s board, which was controlled by Musk, and approved by shareholders who were misled by Tesla’s proxy materials before being asked to vote on the matter. Musk filed for an appeal, and the case is now in the hands of the Delaware Supreme Court.
As CNBC previously reported, Richards, Layton & Finger, a corporate defense firm whose clients include Musk and Tesla, helped draft the bill. The firm told CNBC that it wasn’t working on behalf of any specific client and that it was “part of a group, including highly respected lawyers, professors, and former jurists.”
Other shareholders’ attorneys have opposed SB21, or called for significant revisions, in part because of the bill’s unusual rollout.
Changes to Delaware corporate law historically have been drafted by a broad coalition of attorneys representing companies, executives and minority shareholders, and who are part of the Delaware State Bar Association’s Corporation Law Council (CLC).
SB 21 was introduced to Delaware’s legislature on Feb. 17, without any initial review or participation by the CLC.
Matt Meyer, candidate in the 2024 Delaware gubernatorial election to replace term-limited incumbent governor John Carney.
Courtesy: New Castle County
Townsend said Delaware’s elected leaders had fielded complaints from a number of public companies, or attorneys representing them, which he declined to name. Their frustrations had reached a “boiling point” he said, while other states like Texas and Nevada were making a concerted effort to provide an alternative.
“We wanted to address what we can legislatively,” Townsend said.
If Delaware’s House passes the bill, it would hit the desk of Democratic Gov. Matt Meyer.
Even though Delaware is a heavily Democratic state — Trump lost by almost 15% in the 2024 election — the legislation has support from some prominent party leaders, including the governor, as well as corporate defense attorneys, legal scholars and former Delaware litigants unhappy with prior rulings in the state.
Meyer said in an interview on Tuesday with CNBC’s Andrew Ross Sorkin that attorneys and corporate executives have told him that “there is some loss of clarity, predictability and fairness” in Delaware’s corporate law that he believes should be remedied.
A group of 21 law firms, including Cravath, Swaine & Moore, Gibson Dunn and Latham Watkins, sent a letter of encouragement to the state’s general assembly dated March 11.
The group wrote that the bill “provides statutory definitions and safe harbors that enhance clarity and will facilitate proactive evaluation of director appointments, conflicts cleansing and transactional planning.” SB 21 could also help companies incorporated in Delaware to “streamline corporate decision-making and transactional execution,” the lawyers wrote.
In his CNBC interview, Meyer downplayed fears that a so-called DExit was underway, a reference to a mass exodus of companies out of Delaware to incorporate in other states.
Delaware boasts 2.2 million corporate entities from around the world that are registered in the state, including 81% of U.S. companies that went public last year, Meyer said, adding, “The idea that we’re losing something is not totally accurate.”
When he was running for governor, Meyer’s campaign was heavily supported by entrepreneur Phil Shawe, a former Delaware litigant who became an outspoken critic of the state’s Court of Chancery after he was sanctioned in a case concerning who should maintain ownership of a business he started with his ex-fiancee. In 2018, he moved incorporation of the company, TransPerfect, to Nevada.
Last year, Shawe spent $2 million on an ad campaign slamming Delaware, and supporting Musk, all while encouraging other companies to flee the state. Shawe also contributed over $1 million to fund a political action committee supporting Meyer.
Shawe told CNBC, in an emailed statement, that he was not involved in drafting SB21 but “had lots of concerns and ideas” about Delaware’s Court of Chancery, and was “proud to have been at the forefront of this important discussion.”
Gov. Meyer’s office didn’t respond to a request for comment.
Nvidia CEO Jensen Huang delivers the keynote address during the Nvidia GTC 2025 at SAP Center on March 18, 2025 in San Jose, California.
Justin Sullivan | Getty Images
Nvidia said on Tuesday that it will take a quarterly charge of about $5.5 billion tied to exporting H20 graphics processing units to China and other destinations. The stock slid more than 6% in extended trading.
On April 9, the U.S. government told Nvidia it would require a license to export the chips to China and a handful of other countries, the company said in a filing.
The disclosure is the strongest sign so far that Nvidia’s historic growth could be slowed by increased export restrictions on its chips, which the U.S. government says can be used to create supercomputers for military uses. Nvidia reports fiscal first-quarter results on May 28.
During President Biden’s administration, the U.S. restricted AI chip exports in 2022 and then updated the rules the following year to prevent the sale of more advanced AI processors. The H20 is an AI chip for China that was designed to comply with U.S. export restrictions. It generated an estimated $12 billion to $15 billion in revenue in 2024.
Nvidia CEO Jensen Huang said on the company’s last quarterly earnings call in February that revenue from China had dropped to half of pre-export control levels. Huang warned that competition in China is growing, and for the second straight year, Nvidia listed Huawei as a competitor in its annual filing.
China is Nvidia’s fourth-largest region by sales, after the U.S., Singapore, and Taiwan, according to the company’s annual report. More than half of its sales went to U.S. companies in its fiscal year that ended in January.
Nvidia’s H20 chip is comparable to the H100 and H200 AI chips used in the U.S. and other countries, but it has slower interconnection speeds and bandwidth. It’s based on a previous generation of AI architecture called Hopper introduced in 2022. Nvidia is now focusing on selling its current generation of AI chips, called Blackwell.
DeepSeek, the Chinese company whose competitive AI model R1 unveiled earlier this year upended markets, used H20 chips in its research.
In addition to the existing Chinese export controls, Nvidia also faces new restrictions on what it can export starting next month, under “AI diffusion rules” first proposed by the Biden administration.
Nvidia has argued that further controls on its chips would stifle competition and potentially even erode U.S. competitiveness in technology. The company previously said it moved some of its operations, including testing and distribution, out of China after the 2022 export controls.
At the company’s annual conference last month, when asked about Chinese export controls, Huang said Nvidia works to comply with the law, but he also noted that about half of the world’s AI researchers are from China, and many of those work at U.S.-based AI labs.
Nvidia said in Tuesday’s filing that the U.S. government told the company on Monday that the license requirement for H20 chips would be in effect “for the indefinite future.”
Nvidia shares have dropped 16% this year, largely due to President Trump’s announcement of widespread tariffs on top trading partners. While exemptions have been made on various electronics products, including smartphones, computers and semiconductors, Trump and some officials said over the weekend that the reprieve was temporary and part of plans to apply separate tariffs to the sector.
Shares of Advanced Micro Devices dropped more than 7% in after-hours trading on Tuesday following Nvidia’s disclosure. AI chipmaker Broadcom fell almost 4%.
WATCH: Nvidia says U.S. requires license to export H20 products to China
Dylan Field, co-founder and CEO of Figma Inc., after the morning sessions at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 11, 2024.
Bloomberg | Bloomberg | Getty Images
Design software maker Figma said on Tuesday that it has submitted paperwork to the U.S. Securities and Exchange Commission for an initial public offering.
The confidential filing lands 16 months after the company scrapped a deal to be acquired by Adobe for $20 billion due to regulatory pressure in the U.K. The San Francisco startup had originally agreed to the deal 2022. Adobe paid Figma a $1 billion termination fee.
Figma’s software is popular among designers inside companies who need to collaborate on prototypes for websites and apps. The company was valued at $12.5 billion in a 2024 tender offer.
“There are two paths that venture-funded startups go down,” Dylan Field, Figma’s co-founder and CEO, said in an interview with The Verge last year. “You either get acquired or you go public. And we explored thoroughly the acquisition route.”
The announcement lands at a precarious moment for the tech IPO market, which has been largely dormant since late 2021. The Trump presidency was expected to revive new offerings due to promises of less burdensome regulations.
But after filing their prospectuses with the SEC, fintech company Klarna and online ticket marketplace StubHub delayed their IPOs earlier this month following the market turmoil caused by Trump’s announcements on widespread tariffs. Digital banking service Chime, which had filed confidentially with the SEC, also postponed its planned offering.
Turo, a car-sharing service, withdrew its IPO prospectus in February, three years after filing its initial prospectus.
Figma was founded in 2012 and is backed by investors including Andreessen Horowitz, Durable Capital, Greylock Partners, Index Ventures, Kleiner Perkins and Sequoia Capital. The company, which ranked 26th on CNBC’s Disruptor 50 list in 2024, had about $600 million in annual revenue as of early last year.
— CNBC’s Ari Levy contributed to this report.
Technology
Meta CEO Mark Zuckerberg considered spinning off Instagram from Facebook in 2018: FTC trial
Thilina Kaluthotage | Nurphoto | Getty Images
Meta CEO Mark Zuckerberg considered spinning out Instagram in 2018 on concerns about the rising threat of antitrust litigation against Facebook, according to an email presented Tuesday in a Washington, D.C. courtroom.
During Zuckerberg’s second day of testimony in Meta’s antitrust trial with the Federal Trade Commission, lawyers representing the FTC introduced an email from May 2018, in which Zuckerberg appeared to comment on the possibility of separating the photo-sharing app his company purchased in 2012 for $1 billion.
“And i’m beginning to wonder whether spinning Instagram out is the the only structure that will accomplish a number of important goals,” Zuckerberg wrote in the email. “As calls to break up the big tech companies grow, there is a non-trivial chance that we will be forced to spin out Instagram and perhaps WhatsApp in the next 5-10 years anyway. This is one more factor we should consider.”
Facebook bought Instagram in 2012, when the photo app had 13 employees and Zuckerberg was poised to take his company public in what, at the time, was the largest tech IPO on record. The purchase of Instagram and 2014 acquisition of WhatsApp for $19 billion are at the heart of the blockbuster antitrust trial that kicked off Monday and could last weeks.
The FTC alleges that Meta monopolizes the social networking market, and has argued that the company shouldn’t have been able to complete those acquisitions. The agency is seeking to cleave the apps from Meta as a possible remedy.
Meta disputes the FTC’s allegations and claims the regulator mischaracterizes the competitive landscape and fails to acknowledge a number of rivals like TikTok and Apple’s iMessage, and not merely other apps like Snapchat. Earlier in the trial, the FTC also presented an Oct. 2013 email in which Zuckerberg told other Facebook executives that Snap CEO Evan Spiegel rebuffed his $6 billion offer to buy Snapchat.
Zuckerberg also said in the 2018 email that the company’s “best estimates are that, had Instagram remained independent, it would likely be around the size of Twitter or Snapchat with 300-400 million MAP today, rather than closer to 1 billion.” MAP is short for monthly active people.
WATCH: Mark Zuckerberg takes witness stand on first day of antitrust trial.
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