Tesla CEO Elon Musk is proposing a shareholder vote to relocate the company's state of incorporation from Delaware to Texas.

Musk's decision follows a Delaware judge's invalidation of his $US56 billion pay package and Musk's criticism of Delaware's legal environment.

The move coincides with Musk's broader investments in Texas, including gigafactories, a lithium refinery, and the relocation of Tesla's headquarters to Austin.

Tesla's stock saw a nearly 2% increase in pre-market trading following the announcement.

Musk's deepening investment in Texas extends to SpaceX's expansion and growing political connections within the state.