Good morning. Andrew here. The drumbeat for more companies to incorporate in Texas is growing. There are big implications for both management and shareholders — and ultimately which of those groups has more power. My colleague Niko Gallogly digs into what it means to do business in the Lone Star State. Plus, Calum Marsh takes a look at an unusual and surprising investment area for venture capital firms: indie movie studios. And our quiz this week, on A.I., will likely stump you. (Was this newsletter forwarded to you? Sign up here.)
A new kind of Wild WestElon Musk scored a major victory this month when Tesla awarded him $29 billion, a “first step” in a long-promised payday. It was also a win for Texas, where Tesla is now incorporated. A new law in the state helped pave the way for Musk’s pay package after it was initially blocked by a Delaware judge. Texas’ low corporate tax rate and employer-friendly labor laws have long made it an attractive place for businesses, but most big companies — two-thirds of the Fortune 500 — still incorporate in Delaware. Corporate America’s backlash to a string of decisions by Delaware courts, including the one voiding Musk’s pay package, has heightened the opportunity for Texas to compete for corporate domicile. Some major companies, including SpaceX, Dropbox and TripAdvisor, have decided to leave (or rather, as the exodus from Delaware has been named, “Dexit”). Over the past few months, the Texas Legislature has passed several bills that could help attract Delaware’s defectors by shifting more power from shareholders to executives. Under the new laws:
The aim is to tell boards and executives in Delaware that “Texas is open for business,” said Nathan Jensen, a government professor at the University of Texas-Austin. States have been competing for corporate charters since the late 1800s. The incentives are high: About 30 percent of Delaware’s revenue in 2024 came from franchise taxes. Politicians often claim new charters as a political victory, framing Delaware’s court decisions as examples of unnecessary interference. When Tesla reincorporated in Texas, Gov. Greg Abbott wrote on X: “Congrats Elon on getting the pay you were promised and on your new incorporation in Texas.” Texas has succeeded in wooing Musk’s Tesla and SpaceX, but it faces competition from Nevada, which offers similarly lax governance laws. In addition to Dropbox and TripAdvisor, the venture capital giant Andreessen Horowitz recently departed for Nevada, announcing its move in a blog post titled, “We’re Leaving Delaware, and We Think You Should Consider Leaving Too.” It’s a “regulatory race to the bottom,” said Séverine Neervoort, the global policy director at the institutional investor organization International Corporate Governance Network. “The result is to significantly water down shareholder protections.” Limiting shareholder proposals and lawsuits — the mechanisms investors use for pointing out risks to companies — “makes an investment in an American company less attractive,” said Nell Minow, the chair of ValueEdge Advisors, which counsels institutional investors. But institutional investors may be hesitant to criticize Texas lawmakers after the state targeted them over what it said was an illegal boycott of the oil and gas industry. (BlackRock, for example, was removed from the state’s blacklist of asset managers this summer only after taking steps like leaving climate networks.) Has Texas gone too far? Glass Lewis and Institutional Shareholder Services, two leading proxy advisers, have sued Texas, claiming its law that regulates the advice of proxy advisers violates their First Amendment right to free speech. That’s not the only aspect of that law that has raised legal questions: Its regulation of proxy advisers and shareholder proposals applies to companies headquartered, but not incorporated, in Texas. That’s a departure from the longstanding principle that a company’s corporate governance falls under the laws of the state in which it incorporates, regardless of where it is physically based. Applying a corporate governance law so broadly is an attempt by Texas to “trump” the corporate governance laws of other states, said Ann Lipton, a professor of corporate governance at the University of Colorado Boulder. The move is likely to be challenged in courts. Lipton said that by tying business deregulation to culture war issues — for example, by discouraging proxy advisers to weigh in on E.S.G. issues — Texas may inadvertently end up scaring corporations who don’t want their E.S.G. efforts to pose a legal risk. Nevada, which does not regulate E.S.G. with its governance laws, may seem like a safer bet. “If this race is on, I think Nevada wins,” she said.
Chipmakers will give the U.S. a cut of China sales. Nvidia and Advanced Micro Devices struck a highly unusual deal with President Trump to pay the government 15 percent of the money earned from selling A.I. chips in China, in exchange for permission to resume selling some powerful semiconductors to Chinese companies. Trump is also said to have discussed the U.S. acquiring a piece of the chipmaker Intel this week in a meeting with the company’s C.E.O., Lip-Bu Tan, The Wall Street Journal and Bloomberg report. Stocks soar right past alarming inflation numbers. On Thursday, markets shrugged off news that the Producer Price Index, which measures the inflation trends facing businesses, rose at the fastest monthly pace since March 2022. An earlier inflation report this week showed steady overall inflation, but also signs that businesses are passing on tariff-related costs to consumers. Evidence of stickier inflation could factor into deliberations at the Fed, which is poised to lower interest rates in September. Trump and President Vladimir Putin meet in Alaska. Both leaders offered vague statements about progress, but they did not announce a deal on any issue. Putin was greeted with a warm welcome despite being under U.S. sanctions and subject to an arrest warrant by the International Criminal Court for war crimes. The Russian leader supported Trump’s claim that he would not have invaded Ukraine in 2022 if Trump had been president then. Other big deals: Less than a week after David Ellison’s Skydance took over Paramount, the combined company announced that it had struck a seven-year $7.7 billion deal for the rights to stream and broadcast the Ultimate Fighting Championship. The A.I. start-up Perplexity made an unlikely bid to buy Google’s Chrome web browser for $34.5 billion. Meat is back on the menu at Eleven Madison Park. And Taylor Swift finally did a podcast.
Venture capital goes to the (indie) movies
“Sorry, Baby,” an indie drama created by and starring the writer-director Eva Victor, is the kind of niche film that just a few years ago might have had meager financial prospects. It’s not a sequel or a genre film. It has no major bankable stars. And its subject matter — a woman’s trauma in the aftermath of an assault — is difficult and nuanced, not buzzy. But indie movies like “Sorry, Baby” have found a surprising commercial niche — one that is starting to catch the attention of venture capital firms like Thrive Capital and Sequoia. Offbeat indie films like “The Substance” (Mubi), “Anora” (Neon) and “Everything Everywhere All at Once” (A24) are theatrical heavyweights earning tens or even hundreds of millions at the box office. “Sorry, Baby” won an $8 million deal after its premiere at the Sundance Film Festival in Park City, Utah, and went on to have the highest per-screen average gross of any film over its opening weekend. The film is still a far cry from a blockbuster, but a huge improvement from the mere tens of thousands a similar film may have earned a decade ago. “The market isn’t just different from 15 years ago. It’s different from like, three years ago,” Lia Buman, a producer of “Sorry, Baby,” said. Venture capitalists are betting on the trend. In June, A24 announced that it had closed an investment round led by Thrive Capital, bringing its total valuation to $3.5 billion. And the same month, another indie filmmaker, Mubi, announced that it had raised another $100 million in growth financing, led by Sequoia Capital. One aspect of the strategy: a new kind of star power. Studios have built their own brands by marketing their releases to millennials and Gen Z, and engaging with them closely and directly with social media campaigns and savvy advertising. A24 sells branded merchandise, and Mubi, its closest competitor, sells a tote bag bearing its logo that has become a signifier of cinephile cool. Though A24 puts out many movies that it greenlit and financed from the start, it also scouts major film festivals. Many young moviegoers see the A24 label as a seal of quality, which provides a built-in audience for unconventional films like “The Brutalist,” “Uncut Gems” or “Midsommar.” Those films in turn keep up the filmmaker-first reputation that built A24’s brand. These aren’t your grandpa’s indie movies. The art house market used to be dominated by somber, stuffy dramas aimed at older audiences. A24 in particular now packages unconventional films in a compelling, consumer-friendly way. The studio often highlights its films’ cult appeal, playing up their edginess with catchy aesthetic posters and oblique trailers. The critic Nick Newman described the recognizable style as “not explicitly commercial but not too challenging, with big themes, weird flourishes or recognizable actors doing something off-color,” which, for younger audiences especially, “are all very exciting, and something to get devoted to and invested in.” Making money with unusual and sometimes challenging films is still a difficult balancing act, but “these distributors are doing a superb job of staying close with their audiences — staying engaged and building trust,” said David A. Gross, who runs the FranchiseRe movie consultancy. He added, “It’s a specific way of doing business and they’ve pioneered it.” Quiz: A rolling startYou’ve probably heard that generative A.I. is set to “revolutionize” advertising, accounting, law, and business itself. But according to recent surveys, at most companies, it’s still more of an experiment than a revolution, reports The Times’s Steve Lohr. While businesses expect to increase their investments in generative A.I. by 94 percent this year to $61.9 billion, according to the technology research firm IDC, few have seen a financial payoff yet. About eight in 10 companies reported in a recent McKinsey & Company study that they’ve seen “no significant bottom-line impact.” And many pilot projects never take off. In a survey of more than 1,000 business and technology managers by S&P Global, what percentage said their companies had abandoned the majority of their A.I. pilot projects by the end of 2024? A. 8 percent B. 36 percent C. 42 percent D. 98 percent We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times. Thanks for reading! We’ll see you Monday. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com. Quiz answer: C.
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