The Scoop
Affirm, the fintech giant controlled by Paypal co-founder Max Levchin, plans to move its legal home out of Delaware, joining in the Elon Musk-inspired protest movement against America’s longtime corporate home.
The company is preparing to reincorporate in Nevada or Texas, according to people familiar with the matter. Affirm joins a growing list of companies quitting Delaware in a rebuke to legacy institutions they see as beholden to liberal forces. Levchin worked at PayPal with Musk, who set off the #Dexit push when he moved Tesla to Texas last year in protest after a Delaware judge nixed his $56 billion bonus.
DropBox, Roblox, Bill Ackman’s investment fund Pershing Square, AMC Networks, and Madison Square Garden Entertainment are all in the process of reincorporating in Nevada, which offers insiders more immunity from lawsuits and wider discretion in day-to-day management.
MercadoLibre, another fintech giant, is reincorporating in Texas, and Meta flirted with doing the same but left the matter off its corporate ballot filed publicly last week. Walmart, which Semafor reported was considering a move, hasn’t yet finalized its 2025 ballot.
“At this point, any lawyer recommending incorporation in Delaware is committing malpractice,” Musk posted on X last week.
Affirm’s move would need shareholder approval, but Levchin controls almost half of the company’s votes through special stock. Another 18% of the vote is in the hands of Shopify, which invested in Affirm in 2020. An Affirm spokesman declined to comment.
Know More
Delaware in response made significant changes to its corporate law that expands deference to CEOs and large stockholders. The state relies on company fees and related activities to fund for one-third of its budget.
“Everybody hates Duke basketball. Why? Because they always win,” Delaware Gov. Matt Meyer told Semafor in an interview earlier this month. “Delaware is always winning the corporate franchise… There are 49 other states who look at our corporate revenues, and say, ‘Wait a second, how do we grab some of that?’”
Levchin, Musk, Peter Thiel, and Sequoia’s Roelof Botha are among the members of “Paypal Mafia,” a group of technologists who have gone on to achieve great success since leaving the payments company they launched in the late 1990s.
“These friendships are deeper than business and politics,” Levchin told Semafor’s Andrew Edgecliffe-Johnson in an interview earlier this year. “I consider Elon a friend and Peter a friend, and David [Sacks] a friend.”
Liz Hoffman contributed to this report.
Step Back
The companies that led the charge out of Delaware have mostly been tech firms controlled by insiders like Roblox’s David Baszucki, but that’s starting to change.
MercadoLibre, which does not have a dominant stockholder, will provide a test of how money managers like BlackRock and Vanguard feel about the exodus from Delaware. Fidelity National Financial, a service provider to the mortgage industry, is similarly seeking shareholder approval to reincorporate in Nevada after an identical proposal failed to gain majority support last year.
Notable
- “Delaware has squandered its inheritance” by allowing litigants to “second-guess” corporate decisionmaking, Texas Governor Greg Abbott wrote in a Journal op-ed last month.
- Some corporates in Canada are facing shareholder criticism for redomiciling out of the Great White North to the US.