I’ve covered the The Trade Desk proxy here before and how controlled companies might benefit from redomesticating away from Delaware. In his memorandum accompanying the proxy statement, Steven Davidoff Solomon points out that his own analysis does not show any negative premium associated with incorporating away from Delaware. This is how he put it:
As I noted above in Section IV, recent academic studies have found no premium associated with Delaware incorporation, and in some cases, such a premium may even be negative for controlled companies. To provide further information on this issue to the Board, I conducted case studies of the five reincorporations out of Delaware involving companies with a market capitalization of at least $200 million. These companies are Tesla, Inc., Fidelity National Financial, Inc., TripAdvisor, Inc., Cannae Holdings, Inc., and Rezolute, Inc.
Evidence for a possible negative premium for controlled companies incorporated in Delaware comes from an article by Edward Fox, that “finds, surprisingly, that controlled Delaware firms are actually slightly less valuable than similar companies incorporated elsewhere.” (emphasis in original).
Given that recent redomestication announcements for companies with market capitalizations of over $200 million have already been examined, I thought it might be interesting to take a crude peek at market reactions for companies reincorporating to Nevada with under $200 million in market capitalization.
These firms sit in a different position because the fees and expenses associated with maintaining a Delaware domicile may be more material to them. As best I can tell, the recent Nevada reincorporations include Laird Superfood, Inc. (LSF); Save Foods, Inc. (NITO); Augusta Gold Corp. (AUGG); LogicMark, Inc.(LGMK); and Dragonfly Energy Holdings Corp. (DFLI).
Let’s start with Laird Superfood. It currently has a market cap of about $63 million. It announced an intention to redomesticate to Nevada on Saturday, September 23, 2023 in a preliminary proxy. The stock price did not seem to react much when trading resumed on Monday, September 25, 2023. Of course, this is a small firm and probably not the most efficient market.

Save Foods offers another example, but probably one of only marginal utility. The company is now known as N2OFF, Inc. It appears to have announced on Monday, July 31, 2023 with a preliminary proxy. The proxy sought approval for reincorporation and a reverse split at the same time. The trade volume seems remarkably low through this period–likely indicating that nobody really cared. This is unlikely to be an efficiently traded firm, so it’s hard to draw any real conclusions.

Our next small firm data point is Augusta Gold Corp. It announced its plans on Tuesday, July 18, 2023 in a preliminary proxy. It also didn’t seem to have any large impact. Again, this is such a small firm that it’s hard to draw any real conclusions.

LogicMark is another example of limited utility. It currently has about $1 million in market cap. It took two shots at reincorporating to Nevada. It first declared its intentions on Friday, June 17, 2022 in a preliminary proxy. The proposal was not approved. It tried again about six months later, announcing its intentions in a preliminary proxy on Wednesday, January 4, 2023. Again, the stock price does not appear to be reacting–which isn’t surprising given the market cap. This second time the proposal was approved.

Finally, Dragonfly Energy Holdings offers another example with a current market cap of about $37 million. It announced a plan to reincorporate on Thursday, January 12, 2023 in a preliminary proxy. Here, I pulled a slightly different chart because it appears Dragonfly’s stock price was declining all through that month. I don’t see any change in the overall trend right around the reincorporation.

So what to take away from these data points? I don’t see any great evidence, on my limited, unsophisticated look that reincorporations affect the stock price significantly for these small firms. It’s hard to draw any firm conclusions because: (1) these are not event studies; (2) I’m not comparing to similar firms; and (3) this chunk of the market does not appear to be efficiently traded.
For firms where there only real asset is their status as a public company, it probably makes sense to reincorporate to the cheapest jurisdiction if they don’t have a merger partner.