(CapitalWatch, Oct. 31, New York) The stock of TuSimple (Nasdaq: TSP) tanked 47% Monday after its chief executive officer got ousted amid a probe for possible financing and transfer of technology to China.
In a filing with the U.S. SEC, the smart truck startup said its board of directors has terminated the employment of Xiaodi Hou, appointed interim CEO Ersin Yumer, and is searching for a new chief executive. Hou, who co-founded TuSimple, also lost his position as chairman, according to the statement.
The booting was decided in connection with the audit committee's probe. The securities filing stated that during 2021, TuSimple employees worked on projects for China-based Hydron Inc. (f/k/a Turing Auto) and spent at least $300,000 worth of paid time.
Further, the filing said that TuSimple shared confidential information with Hydron and its partners this year during the evaluation of the latter as a potential OEM partner. The non-disclosure agreement was signed post-factum.
"The Company believes based on the Audit Committee's ongoing investigation that the information shared is not related to the intangible assets or patents reflected on the Company's balance sheet. At this time, the Company has not been able to determine the value, if any, of such information," the filing stated.
TuSimple's lead independent director, Brad Buss, thanked Hou in the statement but also added: "Transparency, good judgment and accountability are critical values to our company. We take these values extremely seriously." Buss has taken Hou's seat as chairman of TuSimple.
For TuSimple, top managers seem to have been coming and going. In June, Patrick Dillon left the position of chief financial officer; Eric Tapia, TuSimple's Global Controller and principal accounting officer, is still listed as its interim CFO. Dillon led TuSimple through the IPO process in New York.
TuSimple became a publicly traded company in April 2021, raising over $1 billion, and has seen its share of troubles since. In March, former CEO Cheng Lu, as well as co-founder and chairman Mo Chen, resigned as part of the company's settlement with the U.S. authority on foreign investment, which investigated TuSimple for its ties to China.
Months after its IPO, the company also faced short-seller allegations. In August 2021, Grizzly Research LLC compared TuSimple to the scandal-ridden Nikola Corp. (Nasdaq: NKLA) and pointed to some shared investors in TuSimple who have been sued for negligence. Grizzly also brought up the history of failed startups and bankruptcies by the aforementioned co-founders of TuSimple, Mo Chen and Xiaodi Hou.
The news of CEO Hou's ousting on Monday sent TSP shares tumbling to $3.34 apiece. Year-to-date, the company has shed about 91% of its market value.
TuSimple prepares to release its earnings on Monday after the markets close and will hold a call with analysts early before markets open on Nov. 1. The company reiterated today that it was on track to achieve its annual guidance.