Financial report difficult birth, founder departure, Tucson future "palace fight" when to leave?

Image source: Visual China

Tucson's future "palace fight" drama does not seem to have the meaning of closing the curtain.

Hou Xiaodi, who only staged a revenge drama with the founding team last November, recently announced that he had resigned from Tucson Future. He announced at the LinkedIn: "Early this morning, I officially resigned from TuSimple's board of directors, effective immediately. I still believe in the dream of autonomous driving, but I feel like now is the right time for me to leave the company. ”

As for the reasons for the resignation, according to a SEC filing, before Hou Xiaodi resigned, the company was conducting an internal investigation into rumors that he poached employees of the company to join its newly formed company, and Hou Xiaodi resigned during the investigation.

Hou Xiaodi refuted this claim in a post on his personal LinkedIn account, "I think the so-called investigation is the retaliation of Tucson's future chairman and CEO over my disagreement over multiple decisions." ”

Hou Xiaodi also said in response to foreign media that he did not start another company, implying that it was illogical to accuse him of poaching employees.

According to the notice previously received from Nasdaq, Tucson must file Form 10-Q for the quarter ending September 30, 2022 by May 15, 2023. Tucson will be given time to re-comply with the Listing Rules no later than March 20, 2023 and extend by 180 calendar days or to May 15, 2023 to allow the Company to file Form 10-K.

In response, Tucson Future said that the company failed to file its annual report for fiscal year 2022 on time because of the additional time required to identify and select a new lead accountant, who will complete the review and audit of the company's financial statements.

In any case, the failure to submit the annual report on time, the former "first stock of automatic driving", in the past year, the impression left by the outside world is not business, not technology, but your back and going,-for-tat internal "palace fight", the drama is embarrassing.

Poaching employees investigated? No, this is revenge

Since Hou Xiaodi's rebuttal that the conduct under investigation was purely "revenge", what was the reason for his resignation?

In this regard, he described in detail the reasons for his resignation in an open letter released by his personal LinkedIn account. He explained that he resigned from the board because of an opinion over Tucson's future CEO's "sky-high" compensation package and a disagreement with the company shifting its focus from L4 to L2.

According to the contact between Titanium Media App and relevant people in Tucson Future China, the domestic team has indeed been doing L2 autonomous driving related technology research and development and business promotion, but it has not yet been officially announced.

As for the "sky-high salary", although Lu Cheng's annual salary plan has not yet been disclosed, foreign media have previously reported that Lu Cheng's return clause clearly states that if he is terminated again, Tucson needs to pay a compensatory salary of up to $15 million in the future.

Why is $15 million sky-high? Just look at Tucson's future earnings reports and compare. Tucson had full-year 2021 revenue of $6.26 million, compared to $2.7 million in the third quarter of 2022, a net loss of $113 million, and full-year revenue is expected to be up to $11 million.

What makes Hou Xiaodi even more unacceptable is that this salary is still proposed in the context of layoffs.

In December last year, foreign media revealed that Tucson will cut about 25% of its workforce in the future and restructure, of which the layoffs will affect about 350 employees. However, according to the Wall Street Journal, Tucson's future layoffs may be as high as 700. According to Lei Feng.com, Tucson's future U.S. team has dropped significantly from 1,000 to less than 500, of which the operation and testing teams are the hardest hit areas for layoffs, with a proportion of more than 70%.

The once huge technical team has fallen apart, and the most disappointed is the founder Hou Xiaodi, who has lost control of the company, and he seems to have no better choice than to leave.

"Health certificate" is not insured, water reverse for a year

This is not the first time Hou Xiaodi has torn with Tucson Future.

In mid-2022, the US government department once again investigated Tucson's future on the grounds of "technical sharing between Chinese and American teams". The FBI, the Securities and Exchange Commission, and CFIUS suspect that Tucson has provided improper funding and technology transfer to Hydron in the future.

Hydron is a hydrogen-fueled heavy-duty truck manufacturing company officially announced by Chen Mo in June 2022. "Turing Smart Card" is a car manufacturing company established in Beijing in 2021, and the actual controller behind it is Chen Mo.

Although Tucson Future clarified in a subsequent Form 8-k announcement that the company is not currently under investigation by the SEC or FBI. However, this clarification is not convincing. Because just after The Wall Street Journal reported on the investigation, the board removed Hou from his post.

On October 31, local time, Tucson Future issued an announcement that it terminated the position of then CEO, president and CTO Hou Xiaodi, and removed Hou Xiaodi as chairman of the board of directors, and is looking for a new CEO, during the transition period, Ersin Yumer, executive vice president of operations, will serve as interim president and CEO, and Brad Buss, Tucson's future chief independent director, will serve as chairman of the board.

But only a week later, the ousted Hou Xiaodi teamed up with the founding team and staged a revenge play. On November 10, local time, Tucson Future issued an announcement that four directors were fired and only Hou Xiaodi was retained as a board member. As the sole director of the company, Hou Xiaodi dismissed Ersin Yumer as interim CEO and president, appointed Lu Cheng as the company's chief executive officer, and appointed Chen Mo as the company's executive chairman of the board.

And now, Hou Xiaodi is being "eaten" by this decision. However, will Tucson, who lost Hou Xiaodi, develop in a better direction or worse in the future? The attitude of the outside world is not too optimistic.

Tucson Future, founded in 2015, was ahead of the first wave of investment in autonomous driving. At the beginning of its establishment, it aimed at the "sexiest" L4 level autonomous driving, and the founding team members Chen Mo, Hou Xiaodi, and Lv Cheng were respectively good at technology, business, and capital, and Audio-Technica's entrepreneurial portfolio also coincided with the preferences of investors at that time.

After that, it achieved a US stock listing through SPAC backdoor in 2021, and successfully won the halo of "the world's first stock of autonomous driving". At that time, it coincided with the second wave of autonomous driving, and at that time, capital was optimistic about automatic driving in limited scenarios, and Tucson's future focus on trunk logistics was also one of the most optimistic scenarios.

However, Tucson Future, which seems to be stepping on the right step by step, has since begun a "water reversal": news such as plummeting stock prices, palace fights, censorship, and layoffs collided.

One month before the listing, the Committee on Foreign Investment in the United States (CFIUS) required Tucson Future to issue written notice of Sina's Sun Dream Inc's purchase of the company's redeemable convertible preferred stock in 2017. Subsequently, Tucson Future drafted a notice with Sina, and CFIUS began reviewing the incident.

CFIUS is a federal government committee composed of the heads of 11 government agencies and 5 observers, chaired by the U.S. Secretary of the Treasury. It is authorized to review certain transactions involving foreign investment to determine whether the transactions will have an impact on U.S. national security.

On February 18, 2022, the investigation was completed, the parties reached a settlement and signed an agreement. Under the agreement, two directors representing Sina subsidiary Sun Dream Inc (Cao Guowei and Zhang Yi) will step down at the end of this year's term and will no longer run for board and will not increase their current shares. According to Tucson's future IPO in April 2021, Sun Dream Inc holds a 20% stake.

At the same time, Tucson also agreed in the future to "restrict access to certain data and adopt a technical control plan." Jim Mullen, Tucson's future chief administrative and legal officer, said in an interview that the measures involved restricting some information about the company's China division, including the source code and algorithms for the self-driving truck business.

In addition, Tucson will need to appoint a security officer and a security director in the future, and establish a board-level government safety committee. The committee must meet regularly and report to CFIUS.

Lu Cheng, then Tucson's future CEO, said in an interview after the agreement: "I think this is basically a health certificate issued by the US government. ”

But not long after this "health certificate" was issued, the aforementioned survey of "technical sharing between Chinese and American teams" reappeared. Since then, a series of investigations have cast a deeper shadow over the self-driving company.

Will Tucson still be the "first echelon" in the country in the future?

Before the listing, the simultaneous development of technology research and development and business expansion in China and the United States was a highlight of Tucson's future capital solicitation and external publicity.

In the United States, Tucson's future business will focus more on autonomous trunk line logistics, and in China, it will focus on the landing of autonomous driving technology in the field of ports and terminals.

But the good times did not last long, as the regulators of the two countries tightened their supervision of data security, the bright spots of the past also made Tucson's future anxious, and Tucson in the regulatory gap had to choose between China and the United States in the future.

In July 2022, it was revealed that Tucson's future China business was seeking to be privatized at a valuation of $1 billion, rather than selling the company to a third party. After the completion of the privatization, Tucson will continue to operate independently in the Chinese market with the existing management and organizational structure as the core in the future.

For the spin-off of the two businesses, Chen Mo once blamed the slow business in China in an interview with the media, "This year, the industry environment began to change abruptly, Tucson's future market value fell by 80%, in order to support the landing of mass production cars, Tucson can only sell the relatively slow development of the Chinese business in the future, which can not only reduce costs, but also return some funds." ”

This may be one of the reasons, but the factors are probably manifold. Although the reasons are complex, the results are clear, and it is indeed a fact that Tucson has not come from the declining voice in the Chinese market since its listing.

At present, Tucson's future business in China is mainly based on "pilot" business, distributed in parts of Shanghai and Tangshan.

Some industry insiders once revealed to Titanium Media App that Tucson's business in China was mainly here in Shanghai Lingang, but after SAIC established a truck autonomous driving company, the port business of Shanghai Lingang basically did not have Tucson's future. From a technical point of view, Tucson will do it early in the future, so everyone is accustomed to mentioning the future of Tucson when mentioning automatic driving, but in fact, in recent years, the first-mover advantage of their technology is not obvious.

Tucson chooses to abandon the Chinese market in the future, passively lagging behind, and more competitors have indeed appeared in China. In addition to Geely's long-range cars and SAIC's Youdao Zhitu, there are also autonomous driving startups such as Plus.ai and Wincher Technology.

Faced with the current situation in the Chinese market, Tucson Future China employees told Titanium Media App, "I look forward to the company being able to complete the spin-off this year, and then make efforts in the Chinese market." ”

However, it remains to be seen whether Tucson can return to the first echelon in the future as desired, after all, whether from the perspective of operating mode or market opening, the current Tucson seems to lack certain competitiveness in China in the future.

And with the departure of Hou Xiaodi, will Tucson terminate the "palace fight" in the future? It is not yet known.

(This article was first published on Titanium Media App, author|Han Jingxian, editor|Zhang Min)