Texas is competing for investment, headquarters, and corporate domicile
Earlier this month, SpaceX successfully completed one of the most visually-dramatic space maneuvers in history when the unpiloted 400ft tall "Super Heavy-Starship" rocket was launched from Boca Chica, Texas then caught by the so called "Mechanzilla" mechanical arms at Starbase, in South Texas. This stunning success came just days after the California Coastal Commission blocked SpaceX plans to launch rockets from Vandenberg Space Force Base in Santa Barbara County, California.
The timing of these events seems to tell a story. While a California agency moves to ground SpaceX, Texas is poised to catch more opportunities from SpaceX, other Elon Musk companies, as well as other companies fleeing high-tax and heavy regulation states.
SpaceX was founded by Elon Musk in Segundo, California in 2002. However, in 2014, SpaceX broke ground on its Starbase facility near Brownsville, Texas. During the summer of 2024, Musk announced the move of the SpaceX and X corporate headquarters to Texas as well.
Musk may be an idiosyncratic entrepreneur, but he is hardly alone in moving his investments in Texas. According to Texas Economic Development & Tourism, 297 corporate headquarter locations have moved to Texas since 2015, including diverse companies like Oracle, Caterpiller, HP, and Charles Schwab. In fact, Texas has won Site Selection Magazine's Governor's Cup for 12 straight years as the top state for attracting new and expanded business activity.
It's nothing new to see companies move to Texas to avoid the burden of taxes and regulations in other states. Texas regularly ranks as a top place to do business because of its favorable tax environment, comparatively light regulations, abundant natural resources, and skilled work-force. Texas doesn't have a personal income tax, and the cost of living is affordable compared to coastal states. This helps Texas companies attract and retain talent.
Now, in addition to attracting corporate investment, Texas seems to be positioning itself to be a competitive alternative to Delaware for corporate domiciles and New York for capital markets.
Delaware is easily America's corporate hub. About two-thirds of Fortune 500 companies are formed in Delaware. Venture capitalists typically prefer their portfolio investments to be incorporated in Delaware because Delaware corporate law is considered flexible but predictable. When disputes arise, the Delaware Court of Chancery offers an experienced judiciary that is well-versed in corporate litigation.
However, following a Delaware court's rejection of Elon Musk's record-setting $56 billion bonus, Tesla and SpaceX changed their domicile to Texas from Delaware. This move came about three years after moving the corporate headquarters from Palto Alto to Austin. Is this a reaction from a single politically-engaged entrepreneur, or does this have the makings of a broader trend?
While it is hard to imagine Texas overcoming Delaware's historic advantages, Texas is positioning itself as alternative to Delaware for corporate registrations with the new Texas Business Courts as an alternative to the Delaware Court of Chancery system. The new courts are specialty trial courts with jurisdiction over certain civil cases involving commercial disputes with intermediate appellate jurisdiction vested in the Fifteenth Court of Appeals. The idea of the courts is not only to improve the judicial system for Texas businesses, but to attract businesses from outside the state with a friendly business environment and stable, competent judiciary for corporate litigation.
If it isn't ambitious enough for the state to compete with Delaware, investors in the state are looking to compete with New York by launching a stock exchange. Blackstone, Citadel Securities and other investors have combined forces to start the Texas Stock Exchange, a virtual exchange. TSXE have raised about $120 million to launch the exchange, which they expect to be live in 2026. The TSXE founders aim to tap into frustration with increasing compliance costs at NASDAQ and NYSE, as well as ESG and DEI pressures from NASDAQ. Despite some Texas bravado, the TSXE's success is by no means guaranteed. Several other exchanges have tried and failed to meaningfully compete with NYSE and NASDAQ.
Texas has long attracted entrepreneurs and wildcatters. The launch of the TSXE and Texas Business Courts, appear to be an effort by both lawmakers and the private to make Texas a destination for business operations, headquarters, law, and capital raising.
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