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By Hugh Cameron
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A prominent company is joining the growing trend of businesses relocating their incorporation from Delaware, driven by widespread dissatisfaction with the state's laws.
Video game developer Roblox Corporation has announced that it intends to reincorporate in Nevada. The company cites the Silver State's more favorable "corporate law framework," which it believes better aligns with the company's culture and mission to enhance shareholder value.
Why It Matters
Dubbed the "leave Delaware movement" or "Dexit," many prominent companies in the tech sector, including Tesla, Tripadvisor, and Dropbox, have already left or stated their intention to reincorporate in another state. The movement has been met with concern that this could jeopardize the state's economy, which prompted a recent amendment to Delaware's corporate code.
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What To Know
According to an April 2 filing with the Securities and Exchange Commission (SEC), Roblox, which is currently valued at around $30 billion, is asking for its shareholders' support in reincorporating from a Delaware corporation to a Nevada corporation.
The company said that the move would not affect its San Mateo, California, headquarters or the general operation of the business.
Delaware has long been seen as a business-friendly state. It is known for its corporate tax advantages and is home to numerous major companies as a result.
However, its corporate law framework began to be scrutinized early last year when a judge in the Delaware Chancery Court ruled that Tesla CEO Elon Musk's $56 billion pay package should be rescinded due to Musk's influence over the company board and the alleged misleading of shareholders who voted on the matter.
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Following the decision, which Musk has since been trying to appeal, the CEO reincorporated both Tesla and another of his companies, SpaceX, to Texas from Delaware while encouraging other firms to follow suit.
Since then, several companies have either left or disclosed plans to leave Delaware.
Reports have also recently emerged that Walmart and Meta, the parent company of Facebook, Instagram and WhatsApp, are considering reincorporating outside of Delaware.
In response to the mass tech exodus that could significantly impact its economy, Delaware has moved to amend its corporate code to keep companies in the state.
Last week, lawmakers approved a bill that outlines procedures for structuring transactions between a company and its controlling shareholder. The bill shields the deals from legal challenges by other investors and prevents shareholders from suing company leaders for self-dealing and transactions that include conflicts of interest. The legislation, dubbed "the billionaire's bill" by critics, was promptly signed by Delaware Governor Matt Meyer.
What People Are Saying
Roblox founder, president and CEO David Baszucki said: "We believe that Nevada's corporate law framework and statutory regime aligns with Roblox's culture of innovation, values, and mission to connect the world with civility and optimism. It also allows us to continue to build shareholder value, by providing a supportive, predictable environment. The proposal to reincorporate to a Nevada corporation was recommended following a rigorous and thoughtful analysis by our Nominating and Corporate Governance Committee and our Board of Directors."
"Leave Delaware" in a post on X (formerly Twitter) shared by Elon Musk: "Roblox files to LEAVE DELAWARE and reincorporate in Nevada. Who's next?"
Delaware Governor Matt Meyer told Business Insider in February: "The fact is Delaware is the best location in the world for a company to incorporate, and that's thanks to our legal expertise dating back to 1792. But let's be clear: If any entity leaves Delaware, we're going to work to win them back."
What Happens Next
In its SEC filing, Roblox encouraged its shareholders to vote in favor of the Nevada reincorporation at the company's next annual meeting, scheduled for May 29. After that, the move will "become effective as soon as practicable."
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