(EMBK), NVIDIA Corporation (NASDAQ:NVDA) – TuSimple Paves the Way to Commercialize Its Truck Technology

(EMBK), NVIDIA Corporation (NASDAQ:NVDA) - TuSimple Paves the Way to Commercialize Its Truck Technology

Key points to remember:

  • TuSimple has announced that co-founder and CTO Hou Xiaodi will take over as the company’s CEO
  • The company’s shares lost two-thirds of their value within two days of the announcement, closing at a post-IPO low

By Doug Young

TuSimple Holdings Inc. (NASDAQ: TSP) says two major new developments pave the way for the long-awaited commercialization of its self-driving truck technology. But investors don’t seem to see it that way.

The first of the big announcements came on February 22, when the company cleared a major potential hurdle to its development by revealing that it had reached an agreement with the US national security regulator. Less than two weeks later, it announced a major management shakeup last week that will see its co-founder and CTO Hou Xiaodi take over both of his senior roles.

Although it seems quite large, the first announcement was met with widespread indifference, with shares of TuSimple closing down 1.4% the next day. This may be partly because the company took the somewhat unusual and low-key decision to simply file a statement with the US securities regulator without issuing a more high-profile press release to which investors are concerned. wait for big news.

Although the response to the first ad was muted, it was definitely not the case when TuSimple announced The rise of Hou the roles of CEO and President of the company. The stock fell 22% on the day of the announcement last Thursday and continued its downward march, losing another 13% the following day.

In total, the stock has lost about a third of its value over the two trading days and, at its last close of $11.49, represents an all-time low that is nearly three-quarters below its IPO price. in purse of $40 from about a year ago. The stock was actually close to its IPO price as recently as early this year after the company announced a major milestone in completing what he said was the first fully automated heavy-duty truck driving test on real roads using his in-house developed system.

So what’s going on with this company?

The answer is far from “simple” as the name of the company suggests. TuSimple’s roots are in China, although lately it has focused on its US operations which are much more advanced than those in the birthplace of its two founders, Hou and fellow co-founder Chen Mo. .

Its rapid progress in the United States has helped attract a number of big-name investors, including major US courier UPS (NYSE: UPS), chip giant Nvidia (NASDAQ: NVDA) and Navistar. He also has a development agreement with volkswagen(VOW.DE) Traton SE unit and partnership with Swedish truck manufacturer Scania.

Its strong focus on the United States caught the attention of the Committee on Foreign Investment in the United States, better known as CFIUS, which conducted a national security review whose findings were central to the February 22 announcement. Meanwhile, the March 3 news announcement that sparked the sell-off looks more like a power play that saw Hou fire his co-founder Chen Mo as chairman, and also remove the more recently arrived Lu Cheng as chairman. as CEO.

Path to commercialization

With all that background in mind, we’ll spend the rest of this space taking a closer look at both announcements, starting with the CFIUS review. Despite the muted response from investors, this development actually seems quite significant in showing that the company can move forward without the risk of US government interference in national security concerns.

In the announcement, TuSimple said CFIUS had completed a national security review of the company and reached an agreement under which it would limit access to some of its data and “adopt a technology control plan.” The deal will also see TuSimple appoint a director of security, who will chair a government security committee of its board and meet periodically with CFIUS officials.

The other major part of the deal saw TuSimple agree to freeze an investment in the company by major Chinese web portal Sina Corp. at current levels, and also to remove Sina CEO Charles Chao as a member of its board after his current term expires. The move was also intended to reduce any potential Chinese government influence over TuSimple’s board due to Sina’s position as a major Chinese media company, which requires it to have close contact with regulators. Beijing.

As we said before, this development seems quite significant, as it essentially allows TuSimple to move forward in the US with minimal regulatory risk. As a result, it’s a little confusing that TuSimple – which likes to cheat on all of its major developments – chose such a low-key way to announce the deal. Perhaps he also wanted to avoid attracting the attention of regulators in Beijing, where he also hopes to one day exploit his self-driving truck technology.

Reshuffling at the top of TuSimple’s top realms seems relatively straightforward. This will see Hou, one of the company’s co-founders who is also its “mastermind” due to his background in artificial intelligence, take control of TuSimple’s corporate operations in addition to his current role as director of technology (CTO).

Outgoing Chairman Chen Mo, who will remain on the company’s board, is a co-founder of TuSimple but comes from a gaming background. Outgoing CEO Lu Cheng comes from a financial background and has first served as TuSimple’s CFO from 2019 to 2020 before being promoted to CEO about six months before the company’s IPO.

“This is part of a planned leadership succession as the company moves into its next phase of commercializing L4 autonomous trucking technology,” TuSimple said in its statement announcing the shakeup.

It’s entirely possible that investors have been spooked by fears that Hou is spreading too wide by taking on both the roles of chairman and CEO on top of his previous responsibilities overseeing its technology development. People like Hou are also known to be quite tech-savvy, but not always the best admins and managers. Only time will tell if investors’ worries are justified or exaggerated.

From a valuation perspective, at least, the company’s stock still looks relatively heavily valued compared to its peers who are all rushing to bring their self-driving trucking technology to market. TuSimple is currently trading at a price-to-book (P/B) ratio of 1.9, which isn’t stellar but still tops 1.5 for Uber’s backing. Dawn (NSDAQ:AUR) and anemia 0.6 for Onboard technology (NASDAQ: EMBK).

This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.