TripAdvisor Can Reincorporate in Nevada, Delaware Judge Says

TripAdvisor Inc. can move its incorporation to Nevada from Delaware, a judge ruled, though the company will still have to face a shareholder lawsuit over a shift similar to that now being contemplated by Elon Musk for Tesla Inc.

Delaware Chancery Court Judge J. Travis Laster denied the travel review and booking site’s motion to dismiss a lawsuit challenging the move as unfair to shareholders but declined to block the move, saying a “monetary award could be crafted” if the court rules against TripAdvisor.

The TripAdvisor case was filed last year but moved into the spotlight last month after a Delaware judge voided Musk’s $56 billion Tesla chief executive officer pay package as unfair to shareholders. Musk cited the TripAdvisor case in criticizing Delaware courts for overreach. He’s threatened to move Tesla’s incorporation to Texas and has already started to move his other companies’ incorporations out of Delaware.

TripAdvisor shareholders accuse Greg Maffeiand other board members of trying to make it harder to hold directors and officers accountable by moving to Nevada. Both Nevada and Texas have promoted themselves as more friendly to corporate boards than Delaware, where most major corporations are currently incorporated.

Laster said TripAdvisor shareholders had adequately “alleged facts supporting a reasonable inference” the Nevada shift may not be “entirely fair” to them. But he said he wouldn’t block the move because the plaintiffs hadn’t shown that they’d be “irreparably harmed” by allowing the company to go ahead with changing its legal residence.

“Holding these plaintiffs have stated a claim on which relief can be granted does not mean corporations cannot leave Delaware,” the judge said.

Representatives for Needham, Massachusetts-based TripAdvisor didn’t immediately respond to a request for comment on Laster’s ruling. Shane Kleinstein, a spokesperson for Maffei, also didn’t immediately return an email.

Maffei, who controls TripAdvisor through super-voting shares, is a longtime Liberty Media executive who also leads the boards of Live Nation Entertainment Inc. and Sirius XM Holdings Inc. According to the suit, he has a “unique history” of “employing sophisticated financial engineering to serve his personal interests at the expense of his minority investors.”

The proposal to move TripAdvisor’s incorporation to Nevada came before Musk launched his corporate war against Delaware. Since Judge Kathaleen St. J. McCormickvoided his pay package, Musk has moved Neuralink, his brain-implant company, to Nevada and has filed to move SpaceX to Texas.

Musk hasn’t announced yet whether he’ll appeal McCormick’s ruling.

The case is Palkon v Maffei, 2023-0449, Delaware Chancery Court (Wilmington).

--With assistance from Michael Leonard.

To contact the reporters on this story:
Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net;
Matthew Bultman in Arlington at mbultman@bloomberg.net

To contact the editors responsible for this story:
Anthony Lin at alin364@bloomberg.net

Michael Smallberg

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