Is Delaware Losing Its Appeal? Billionaire Bill Ackman Announces Move to Nevada

Billionaire hedge fund manager Bill Ackman is considering moving his management company, Pershing Square Capital Management, from Delaware to Nevada. This decision comes after San Francisco-based tech giant DropBox shared similar plans to recorporate in the Silver State.

Ackman is among the many billionaires spearheading what experts call the "Delaware exodus," which is igniting a debate about whether the state is losing its longstanding title as the nation's premier business hub.

The Billionaire Migration

Billionaire Bill Ackman has announced he is considering relocating his firm, Pershing Square Capital Management, to Nevada. This follows a similar move by San Francisco-based tech giant Dropbox.

On February 1, Dropbox announced its plans to reincorporate in Nevada on X. The file-hosting service provider said Nevada's "statute-focused approach to corporate law" will likely foster "more predictability" than Delaware's.

In response to the announcement, Ackman said, "We are reincorporating our management company in Nevada for the same reason. Top law firms are recommending Nevada and Texas over Delaware."

The Catalyst

The debate over Delaware's longstanding title as the country's premier business hub has continued for some time. However, it only gained widespread attention when Musk publicly expressed his opinions on the matter.

It started around 2018 when TransPerfect CEO Phil Shawe scrutinized the court's decision in his legal battle with his former partner and co-owner, Elizabeth Elting.

After the lengthy litigation, Shawe announced his plans to reincorporate in the Silver State, stating that "Delaware was the default option for most companies, including TransPerfect, but times have changed. Other states, Nevada being one of them, have presented themselves as a compelling alternative."

In 2024, Tesla CEO Elon Musk made headlines when he relocated his brain implant company, Neurolink, to Nevada, just months after the Chancery Court ruled against his $55 billion pay package.

Musk expressed his disappointment with Kathaleen Saint Jude McCormick's decision regarding his lofty pay package. He urged his followers on X to consider incorporating their businesses in Nevada or Texas rather than Delaware.

Later that same year, Liberty TripAdvisor CEO Greg Maffei followed in Musk's footsteps. Although Maffei's plans were postponed after two minority leaders filed a lawsuit against him, the company moved forward with the reincorporation.

Since then, the public's opinion on the state's legal framework has significantly changed. Former state judge William Chandler says, "Right now, the corporate market is not feeling good about Delaware because of the uncertainty and unpredictability of a few decisions by just two judges."

If the shift continues, Delaware will have to rethink its approach to corporate law or lose its title to Nevada.

The Nevada Edge: Privacy, Liability Protection & Tax Savings

Multiple states have fought tooth and nail for Delaware's title, but only one state came close: Nevada.

University of Virginia School of Law Professor Michal Barzuza said the Silver State deliberately created its legal framework to compete with Delaware's. She explained that the state used the idea of a legal Wild West to attract the companies incorporated in the First State.

Nevada's liability protections are considered the golden standard, offering corporate directors and officers a stronger shield against liability. Specifically, the state has a "no liability" provision that protects entrepreneurs from personal liability for breaches of fiduciary duty.

For instance, shareholders cannot file a lawsuit against another shareholder they believe failed to fulfill their duty unless they have proof of intentional misconduct or a deliberate law violation.

This shield allows entrepreneurs to make strategic decisions about their business's future without fearing being sued. This feature particularly appeals to hedge funds and investment firms like Pershing Square, where investors scrutinize every high-stakes decision.

If Ackman and his executive team choose to incorporate in Nevada, they wouldn't have to worry about being hit by a shareholder lawsuit like TripAdvisor's CEO.

In addition to stronger liability protections, Nevada can offer more privacy. Unlike Delaware, the Silver State doesn't require corporations to disclose the names of their shareholders on public records.

This added layer of privacy is vital for executives who want to keep their personal information out of the public eye.

Another feature that makes Nevada the next best choice after Delaware is its lack of taxes. The state does not impose corporate or individual taxes, nor does it have franchise or estate taxes.

Reincorporating in the Silver State would significantly increase Pershing Square's tax savings and allow the company to explore new investment opportunities.

Given all these benefits, it would be unsurprising that Ackman announced he was moving the company to Nevada.

By prioritizing executive autonomy, privacy, and tax benefits, the Silver State has created an environment where major companies like Pershing Square can operate with greater flexibility and fewer liabilities.

A Demand For Pro-Business Laws

Although Ackman has clarified that they have yet to make a final decision, his comments highlight a growing dissatisfaction with the First State's legal framework. Corporate America wants more pro-business laws and is not afraid to show it.

As more high-profile executives, such as Elon Musk and Phil Shawe, publicly endorse alternative states like Nevada, Delaware's longstanding dominance in the corporate world is facing unprecedented challenges.

If Pershing Square proceeds with its move to the Silver State, it could set a precedent for other investment firms to reconsider their locations. This could further tarnish Delaware's reputation as a business-friendly state.

The state's next best move is to reconsider its approach to corporate governance, which Democratic Governor Matt Meyer plans to do.

Meyer has recently said in a news story that he plans to change how the state handles business disputes. He says his "role as governor is to look at the system, make sure the corporate law is fair, make sure it's predictable, make sure it's clear and consistent."

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DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.