TuSimple, as soon as a buzzy startup thought of a pacesetter in self-driving vehicles, is attempting to maneuver its property to China to fund a brand new AI-generated animation and online game enterprise. The pivot has not solely puzzled and enraged a number of shareholders, but additionally threatens to drag the corporate again right into a authorized morass mere weeks after reaching a preliminary settlement in a category motion lawsuit.
Now, a combat is brewing over roughly $450 million in funds, the majority of which stays in america, TechCrunch has discovered. And arguments over the corporate’s mission lie on the heart of it.
Earlier than the corporate formally disclosed its new enterprise phase in August, a bunch of shareholders who acquired wind of the change despatched a letter to the corporate’s board of administrators. The letter, seen by TechCrunch, alleges “probably fraudulent actions” and asks the board to research whether or not funds had been being misappropriated “to facilitate the expansion of personal ventures” established by Mo Chen, TuSimple’s co-founder and chairman.
Shareholders additionally complained the corporate did not disclose its pursuit of AI animation; the board would ultimately publicly announce a brand new AI animation and gaming enterprise.
The group, which despatched the letter anonymously in July, threatened litigation. Nonetheless, on the time of this writing, no fits have been filed.
TuSimple’s new enterprise phase, which is growing an animated characteristic movie and online game primarily based on the science fiction collection “The Three-Physique Drawback,” is a startling change from its origins.
The China-backed startup, based in 2015 by Chen and Xiaodi Hou, was as soon as a darling within the autonomous automobile trade. TuSimple, which was headquartered in San Diego and had operations in Tucson, raised $648 million in enterprise cash from Chinese language VCs and mega corporations comparable to Sina Corp., in addition to high-profile U.S. companies like Nvidia, Goodyear, and UPS. It had key partnerships with Navistar and Ryder. The corporate’s IPO in 2021, through which it raised one other $1.35 billion at a post-money valuation of $8.49 billion, was meant to speed up its drive towards a industrial self-driving vehicles enterprise.
TuSimple appeared unstoppable. However its plans had been quickly derailed by inner drama, restructuring, a misplaced partnership with Navistar, a self-driving truck crash, and federal investigations into the corporate’s ties with China.
TuSimple’s inventory worth plummeted consequently, falling from a excessive of $62.58 to below $1 a share earlier than it voluntarily delisted in January 2024. Immediately, it’s buying and selling over-the-counter at round $0.19 per share. TuSimple’s struggles prompted the corporate to take inventory of its operations and in the end exit the U.S. The corporate has stored its Asia-Pacific subsidiary, generally known as TuSimple China.
Tied up funds and distrust
TuSimple China is relying on accessing the money that it has left. World TuSimple CEO Cheng Lu instructed TechCrunch the corporate has about $450 million in money.
And TuSimple continues to plow by capital. The Chinese language subsidiary’s annual working bills exceed $100 million, or about $8 million a month, in response to a declaration by Lu in a courtroom submitting from January 2024.
Immediately, the majority of the $450 million that continues to be in U.S. accounts is essentially inaccessible resulting from three lawsuits, together with a shareholder class motion the corporate is near settling for $189 million. A non permanent restraining order issued by a California district courtroom in January remains to be in impact, blocking TuSimple from shifting property outdoors of the U.S. aside from transfers which are in the middle of the corporate’s enterprise.
TuSimple has argued it ought to have full entry to these funds. The corporate must switch cash freely to China to be able to “commercialize autonomous driving expertise” there, Lu mentioned in a June 2024 declaration despatched to the U.S. District Court docket of the Southern District of California.
“TuSimple China would be the principal working asset of TuSimple and, for the foreseeable future, the only means by which TuSimple’s shareholders — together with many U.S. traders — could profit from the commercialization of TuSimple’s autonomous driving expertise,” Lu mentioned within the June courtroom submitting.
The declaration says nothing about animation and gaming. When requested about this, Lu mentioned animation and gaming fall below the scope of commercializing autonomous driving expertise.
“The phrases are ‘commercializing the expertise,’ and we’re attempting to commercialize expertise,” Lu mentioned. “When you commercialize, which means you earn cash off the expertise, and we’re attempting to earn cash off it, plain and easy.”
In letters to the TuSimple board and conversations with TechCrunch, involved shareholders say they’ve little religion in administration to generate worth for them, and that the delisting and U.S. shutdown ought to have been a possibility for the corporate to liquidate and redistribute wealth again to them.
“The corporate’s autonomous trucking operations seem to nonetheless be within the growth state at finest, regardless of working over $1.8 billion in gathered losses,” wrote Camac Companions, an investor with a 5.6% stake in TuSimple, in a letter to the board on Could 30. He urged the board to maintain TuSimple’s funds within the U.S. to guard the corporate property for the good thing about all shareholders.
If the dispute turns into one other lawsuit, TuSimple could possibly be additional delayed from transferring funds again to China. However the clock is ticking. TuSimple filed on the finish of August to deregister with the SEC. Whereas TuSimple has been delisted for 9 months, the corporate remains to be registered with the SEC, which suggests it stays below U.S. scrutiny. As soon as the cash goes to China, shareholders within the U.S. can have no recourse to claw again funds from their authentic funding.
The worldwide wrestling match over TuSimple’s property comes as overseas direct funding into China has seen 12-month lows, and Chinese language VCs with U.S. cash have left the nation amid geopolitical tensions. Chinese language companies are in search of inventive methods to draw outdoors capital.
Rolling again AVs, scaling up animation
As TuSimple pushed for these U.S.-based funds, its AV operations in China had been in flux.
TuSimple China had in late 2023 begun beefing up its autonomous driving group in anticipation of shutting down U.S. operations, a number of sources instructed TechCrunch.
It was that ramp up that made what occurred in early 2024 so surprising.
In late January, roughly 10 days earlier than the Chinese language New Yr the next month, TuSimple introduced a compulsory “lengthy vacation” for workers, in response to the accounts of a number of former workers who spoke to TechCrunch on situation of anonymity. That lengthy vacation successfully was a layoff that affected tons of of employees within the firm’s core autonomous automobile enterprise, in response to a number of former workers. TuSimple instructed workers that in the event that they voluntarily left the corporate, they might obtain severance. Sources say the details about severance was communicated verbally throughout an all-hands, so there was no written discover.
Sources additionally inform TechCrunch that TuSimple China’s headcount dropped from 700 to 170, however that some workers had been employed again for the animation program.
Lu has denied that TuSimple laid off workers. In an interview with TechCrunch, Lu mentioned round 500 workers, together with chief expertise officer Naiyan Wang and different core tech workers, resigned en masse and of their very own accord between February and Could.
Lu didn’t present a purpose, however famous that the non permanent restraining order, issued in January, brought on TuSimple to lose strategic autonomous trucking partnerships in China. Lu didn’t verify the character of these partnerships, however in a January courtroom submitting, the manager mentioned TuSimple China’s budding partnership with the Port of Shanghai to check self-driving expertise was in danger if the non permanent restraining order blocked the corporate from sharing proprietary information with the port’s fleet administration system. Lu’s declaration additionally famous the non permanent restraining order threatened two contracts to license the corporate’s superior driver help expertise to truck producers in China, in addition to TuSimple’s ongoing collaboration with Nvidia.
Lu confirmed to TechCrunch that TuSimple is now not working self-driving operations within the nation, though he added the corporate remains to be actively in search of strategic companions to assist the corporate develop self-driving tech.
In the meantime, TuSimple spent a lot of 2024 licensing leisure IP and staffing up its new animation and gaming enterprise phase, in response to public job listings and interviews with former workers. Lu instructed TechCrunch that at present there are round 250 workers at TuSimple China — all of whom work on each self-driving and animation and gaming.
All through June, July, and August, TuSimple China posted new job listings looking for workers with expertise in online game growth and animation. The roles included titles like video editor, movie director/screenwriter, sport writer, generative AI-focused backend engineer and anchor for reside broadcasting, in response to public postings. One description mentions TuSimple is engaged on a challenge associated to martial arts and that the corporate owns “a number of Chinese language high IP.”
There are additionally job postings that might ostensibly be for self-driving, comparable to a crawler engineer, company growth and technique affiliate, and controller for the finance group.
Regardless of protests from some shareholders, TuSimple has defended its actions, arguing that each a nationwide safety settlement in 2022 with the Committee on International Investments in america and non permanent restraining orders from California courts have made it subsequent to not possible to run self-driving operations in China. One non permanent restraining order was lifted July 31; the opposite stays in place.
Lu argued the pivot to animation and gaming, a fast-growing $600 billion trade, was a logical use of the corporate’s self-driving expertise infrastructure and AI, one that might present TuSimple with near-term income.
“We’re taking that know-how and the expertise, and we’re going to generative AI by growing high-quality content material, video video games, and animation sooner utilizing AI that within the close to time period we consider can generate a big quantity of return for our shareholders,” Lu mentioned.
Animation and gaming additionally occurs to be of private curiosity to Chen, in response to a number of traders, former workers, and Lu.
Chen has been a central determine all through TuSimple’s nine-year historical past that extends past his co-founding standing. His connections helped the corporate land a vital funding in 2021 from Sina Corp., which runs China’s largest social media platform Sina Weibo. Charles Chao and Bonnie Yi Zhang, respectively the CEO and CFO of Weibo, had been each members of TuSimple’s board. Solar Dream, an affiliate of Sina, was TuSimple’s largest shareholder for a time, though that funding did result in an investigation by the Committee on International Funding in america.
Chen additionally has a private reference to Yunli Liu, who was Sina’s head of funding and backed the founder’s net gaming firm, Beijing Blue Brothers, which Sina later acquired. Sina additionally controls the IP of “The Three-Physique Drawback.”
Chen’s intertwined enterprise pursuits have at occasions raised the ire of shareholders and caught the eye of U.S. regulators as effectively.
Of their July letter to the board, the group of shareholders alleged Chen is likely to be personally benefiting from TuSimple’s transfer to animation and gaming. They pointed to 4 non-public animation and gaming companies which are related to Chen and his different companies, TuSimple and Hydron, a Chinese language startup launched in March 2021 to construct autonomous-ready hydrogen vehicles.
Certainly one of companies, Beijing BearBear Nation Cultural Media Co., based in November 2020, lists Chen because the supervisor. A TuSimple e-mail handle was used as the corporate’s registered contact in 2021. One other, Shanghai Xia Dao Cultural Communication Co., had the identical submitting handle as TuSimple Beijing when it was based in December 2023, and its registered handle is identical as Hydron’s in Shanghai. The corporate’s CEO, Cheng Zhang, and head of finance, Xiaoning Tian, additionally overlap with Hydron.
The overlap between Hydron and TuSimple, each owned by Chen, has additionally been the topic of investigation. In 2022, after a Committee on International Funding in america probe, TuSimple revealed that its workers spent paid hours working for Hydron in 2021, and that confidential info was shared with the corporate. After reaching a nationwide safety settlement that will maintain TuSimple’s autonomous driving information, expertise, and R&D within the U.S., the board voted to oust one in all its co-founders. However not the one with direct ties to Hydron. As a substitute, the board fired its CEO, Xiaodi Hou, who claimed the removing was executed with out trigger.
The next inventory fall and lack of disclosure round Chen’s relationship with Hydron resulted in a category motion lawsuit from shareholders in November 2022 that’s nonetheless open at present.
The involved shareholders within the July board letter additionally referred to as consideration to 2 new subsidiaries TuSimple fashioned in Could 2024, each of which fall below the “cultural and artwork trade” class. They mentioned that TuSimple’s lack of disclosure across the new subsidiaries, coupled with Chen’s different enterprise connections, is likely to be proof of alleged impropriety.
TuSimple did find yourself disclosing its pivot to AI animation and gaming on August 14, two weeks after the shareholder letter was despatched.
Lu confirmed the existence of the subsidiaries to TechCrunch and rebuffed the concept TuSimple wanted to reveal a possible enterprise avenue with shareholders earlier than it was materially necessary. He pointed to Apple’s Undertaking Titan automotive challenge, which the corporate additionally by no means divulged to shareholders publicly, and famous that TuSimple truly began growing laptop imaginative and prescient for promoting in 2015.
“Corporations internally take a look at new alternatives on a regular basis,” Lu mentioned.
A paragraph detailing Mo Chen’s connections to different non-public companies has been up to date for readability.
