April 14, 2023
Twitter has told the courts that it has a new company name in a new state: X Corp.—an entity incorporated in Nevada instead of Twitter’s previous domicile in Delaware, reports The Wall Street Journal.
While the social-media platform on users’ phones and computers still bears the name Twitter, “Twitter Inc. has been merged into X Corp. and no longer exists,” according to a legal filing last week informing a Florida federal court of the change in a case where Twitter is a party. X Corp. is a privately held company incorporated in Nevada, Twitter’s lawyers said.
The company’s principal place of business remains San Francisco, where Twitter is based, according to the filing. X Corp. has a parent company named X Holdings Corp., the filing shows, according to the Journal. The company also recorded the merger in Delaware filings.
The changes drew attention in recent days, as the documents circulated online and media outlets including Slate wrote about them. The information in the filings prompted online speculation that it was part of a grand vision about which owner Elon Musk has tweeted, which is using his acquisition of Twitter to help create “X, the everything app.”
Twitter responded with an auto-reply poop emoji to an email inquiry from The Wall Street Journal about the reason for the change.
On Tuesday, April 11, amid retweets from Musk about SpaceX, his rocket company, and Twitter’s legacy blue check marks, the billionaire tweeted an “X” without any other context or details. Musk’s history with the letter goes way back: His former online banking startup, X.com, later became PayPal after a merger with another firm. Musk often refers to one of his children as X.
The billionaire also has other business ventures in Nevada. Tesla, the electric-vehicle maker of which he is also chief executive, operates a plant near Reno; The Boring Co., Musk’s tunneling company, has a project in Las Vegas.
In an interview with the BBC late Tuesday, Musk said about the name change: “My goal is to create X the everything app,” and reiterated that “Twitter is an accelerant.”
Some corporate-law specialists say they still have some questions about the company’s structure. Another entity called Twitter was recently registered in Nevada, with Musk as its president, according to a filing, and some observers said it wasn’t exactly clear how that entity related to X Corp. One law professor said it could be an entity that Musk could use for Twitter if he wanted at some future point—or a way to keep anyone else from trying to use the name.
Moving the company to Nevada from Delaware has broader business implications, according to corporate-law specialists.
Nevada has for years tried to present itself as an alternative to Delaware for companies looking for a home, said Benjamin Edwards, a law professor at the University of Nevada, Las Vegas. But Delaware remains more popular, he said, for reasons including the reputation of its Court of Chancery and that many business lawyers and investors tend to be familiar with Delaware law.
Compared with Delaware, Nevada’s laws grant more discretion and protection to a company’s management and officers, said Zohar Goshen, a professor of transactional law at Columbia Law School. Twitter is now “a private company controlled by one person so they can make that move,” he said. For public companies, Goshen said, “It’s not going to be that simple for them to switch to a place where shareholders enjoy less protection.”
“There are a few often-cited reasons why companies might move out of Delaware to Nevada,” said Lauren Pringle, editor in chief of the Chancery Daily, a legal industry publication. They include Nevada’s greater limits on personal liability for directors and officers of a corporation, and limited liability for a breach of duty, she said.
Ann Lipton, a law professor at Tulane University, said moving to Nevada means the company can be sued in that state going forward, instead of in Delaware. But any litigation already under way in Delaware likely won’t move to Nevada, she said.
Musk, who has previously shown a willingness to take legal battles to trial rather than settling, has had a mixed record in Delaware’s Court of Chancery. He faced a monthslong fight in the court over his effort to abandon his $44 billion deal to acquire Twitter. He said Tuesday that he agreed to the deal last year because he thought the judge would eventually force him to do so.
“Moving to Nevada is a way of saying, ‘You won’t see me around here no more,’” Edwards said. If Musk disagrees with the way the Chancery Court has decided his cases, Edwards said, “He can communicate that to them by exiting the jurisdiction. There’s nothing compelling him to play ball in Delaware court.”
Research contact: @WSJ