TuSimple Former CEO Seeks Liquidation via New Board

TuSimple Faces Shareholder Showdown and Liquidation Push

Xiaodi Hou, a co-founder and previously the CEO of TuSimple, is actively campaigning ahead of the company’s annual shareholder meeting this Friday. The meeting will determine the composition of the board of directors.

Legal Battles and Demands for Liquidation

In recent weeks, Hou initiated legal action against TuSimple, seeking to regain control of his voting rights. He has also called for the immediate liquidation of the company and the distribution of remaining cash reserves to shareholders. Furthermore, Hou has requested that courts prevent TuSimple from transferring funds to China.

A Written Consent Process

Hou is now urging shareholders to instigate a change in the board’s makeup. He plans to initiate a written consent process in early 2025, aiming to remove the current directors and replace them with individuals supportive of liquidation. This provides shareholders with an alternative avenue for change, even if the existing board members are re-elected at the upcoming meeting.

TuSimple's Response and Staggered Board Proposal

TuSimple has requested that shareholders re-elect the current directors and approve a plan to stagger the board. Implementing a staggered board would prevent the simultaneous removal of all directors in the future.

Allegations of Trade Secret Theft

Cheng Lu, TuSimple’s current CEO, directed inquiries to a statement concerning Hou’s liquidation efforts. The statement details TuSimple’s ongoing litigation against Bot Auto, Hou’s new autonomous trucking venture, alleging the theft of trade secrets. TuSimple contends that liquidation would potentially shield Hou from further legal proceedings, while shareholders might receive only a limited return on their investment.

The company maintains that liquidation is not the optimal strategy for maximizing shareholder value.

A History of Turmoil

TuSimple has experienced considerable upheaval since its initial public offering in 2021. The current situation arose after the company ceased U.S. operations and delisted from the stock market at the beginning of 2024. While TuSimple initially intended to resume autonomous vehicle testing in China, it subsequently reduced its self-driving team significantly.

Currently, TuSimple appears to be considering the use of its U.S. funds – capital acquired after delisting – to finance a new venture focused on AI animation and gaming. This shift in direction has drawn criticism from shareholders, including Hou.

Hou's Plea to Shareholders

“I address you not only as an investor, but as a co-founder who dedicated seven years to establishing TuSimple as a leader in autonomous driving,” Hou stated in his letter to stockholders. “However, under the present management and board, the realization of this vision is increasingly unlikely. Considering the numerous challenges facing TuSimple under the current leadership…I believe liquidation, potentially returning $1.93 per share (or more) to stockholders, represents the fairest course of action.”

Stock Performance and Cash Reserves

As of Monday, TuSimple’s stock was trading at $0.40 on the over-the-counter market. Hou’s estimated return of nearly $2 per share is based on reports indicating that TuSimple held approximately $450 million in cash within the U.S. as of September.

Background of the Dispute

Hou was removed from his executive roles in 2022 and resigned from the board in 2023 following accusations of attempting to recruit staff for a new enterprise. Hou has consistently denied these accusations, asserting that his dismissal was unjustified. He also cited disagreement with his successor’s compensation package during company-wide layoffs as a reason for his board resignation.

Voting Rights Litigation

In late November, Hou filed a lawsuit against TuSimple and Mo Chen, the company’s co-founder, chief producer, and director, seeking to restore control over his voting rights. Hou argues that a 2022 voting agreement granting Chen control over his Class B shares expired in 2024, thereby reinstating his voting authority.

TuSimple and Chen contend that while Hou currently possesses the shares, he is still obligated to vote according to Chen’s instructions.

Resolution Timeline

A hearing to resolve the dispute over Hou’s 27.9% stake is scheduled for the first quarter of 2025.

This report, initially published on December 16th at 1:25 pm PT, has been updated to include a statement from TuSimple.