Neuralink relocates to Nevada, nears $1B valuation as Tesla considers Texas move

Neuralink, the brain-chip implant company founded by Elon Musk, has changed its location of incorporation from Delaware to Nevada, according to records from the Delaware Secretary of State and the Nevada Secretary of State's website. The move comes about a week after Musk announced that Tesla, Inc. would hold a shareholder vote to relocate its state of incorporation from Delaware to Texas.

Neuralink, which is headquartered in Austin, Texas, near Tesla's headquarters, has raised $295 million since its founding in 2017, according to PitchBook data, and is nearing a $1 billion valuation. The company is developing a chip that could be implanted in the brain to help treat brain diseases and disorders and potentially merge humans with artificial intelligence.

Last week, Musk announced that the company had implanted its first chip in a human patient, who is currently recovering well. The news followed the company's successful test of the chip implantation procedure on primates.

Reuters has contacted Neuralink requesting comment on the incorporation change, and why the company selected Nevada.

The recent developments have prompted legal experts to question whether the Texas relocation for Tesla and the subsequent Neuralink move to Nevada may signal a larger shift of business interests away from Delaware and toward tax-friendly states like Texas. Incorporating in Texas could save Tesla taxes on income generated in the state and streamline operations with the company's headquarters in Austin.

However, critics caution that the moves may trigger investor lawsuits, particularly as Musk's controversial $56 billion compensation package as Tesla's CEO was tied to ambitious goals tied to operational milestones in Delaware and California.

The breakdown of the package included no guaranteed payouts for Musk, contingent on Tesla's market value increasing by $650 billion or more over the next decade. Musk's total compensation as CEO could reach $55.8 billion if Tesla's market capitalization hits $1.6 trillion and other financial milestones are met.

Delaware Chancery Court Judge Jospeh Slights recently ruled the package violated Tesla's shareholders' rights because it didn't give them enough say over Musk's pay. The decision will lead to a shareholder vote on the package's terms, but the judge's ruling could inspire lawsuits from other Tesla shareholders, according to experts.

Steven Davidoff Solomon, a law professor at the University of California, Berkeley, stated, "The question is, will these deals be viewed as properly aligning CEO and shareholder interests, or as sweetheart deals done behind closed doors with conflicted boards?"

Musk may have simultaneously reduced such legal risks by relocating Neuralink to Nevada, as the state does not have a corporate income tax. Following the Neuralink move, Musk may be hoping for a two-state dance involving him relocating his multiple businesses one by one to Texas, allegedly not considering the ramifications.

This could potentially allow him to receive billions in Tesla stock rewards under the compensation package terms. Alexander Kemmitt, a professor at the Stanford Graduate School of Business, argued that investors may not be pleased with the relocation to avoid paying taxes.

He stated, "There is nothing to stop the Nasdaq or New York Stock Exchange from requiring certified copies of Tesla's bylaws to ensure the relocation and the shareholder vote on the jurisdiction change are valid. I expect this to happen, and once it is done, lawsuits will follow."

Other experts also noted potential concerns around the company's operational and governance standards being questioned, given Musk's concurrent role as CEO.

Sean Walker, a law professor at Wake Forest University, commented, "If the S.E.C. gets involved, that opens up a whole other can of worms, especially if there is any suggestion that the Nevada Secretary of State was not vigilant in its duties to ensure that Neuralink was a legitimate operation with proper governance."

For now, Neuralink's move to Nevada appears to be a way for the company to operate legally as an independent entity separate from Tesla, which would help clarify Musk's compensation package and avoid potential investor lawsuits.

Whether this is a sign of things to come for other companies looking to reincorporate in Texas remains to be seen.