TuSimple, once a buzzy startup considered a leader in self-driving trucks, is trying to move its assets to China to fund a new AI-generated animation and video game business. The pivot has not only puzzled and enraged several shareholders, but also threatens to pull the company back into a legal morass mere weeks after reaching a preliminary settlement in a class action lawsuit.
Now, a fight is brewing over roughly $450 million in funds, the bulk of which remains in the United States, TechCrunch has learned. And arguments over the company’s mission lie at the center of it.
Before the company formally disclosed its new business segment in August, a group of shareholders who got wind of the change sent a letter to the company’s board of directors. The letter, viewed by TechCrunch, alleges “potentially fraudulent activities” and asks the board to investigate whether funds were being misappropriated “to facilitate the growth of private ventures” established by Mo Chen, TuSimple’s co-founder and chairman.
Shareholders also complained the company failed to disclose its pursuit of AI animation; the board would eventually publicly announce a new AI animation and gaming business.
The group, which sent the letter anonymously in July, threatened litigation. However, at the time of this writing, no suits have been filed yet.
TuSimple’s new business segment, which is developing an animated feature film and video game based on the science fiction series The Three Body Problem, is a startling change from its origins.
The China-backed startup, founded in 2015 by Chen and Xiaodi Hou, was once a darling in the autonomous vehicle industry. TuSimple, which was headquartered in San Diego and had operations in Tucson, raised $648 million in venture money from Chinese VCs and mega companies such as Sina Corp., as well as high-profile U.S. businesses like Nvidia, Goodyear and UPS. It had key partnerships with Navistar and Ryder. The company’s IPO in 2021, in which it raised another $1.35 billion at a post-money valuation of $8.49 billion, was meant to accelerate its drive towards a commercial self-driving trucks business.
TuSimple seemed unstoppable. But its plans were soon derailed by internal drama, restructuring, a lost partnership with Navistar, a self-driving truck crash, and federal investigations into the company’s ties with China.
TuSimple’s stock price plummeted as a result, falling from a high of $62.58 to under $1 a share before it voluntarily delisted in January 2024. Today, it is trading over the counter at around $0.19 per share. TuSimple’s struggles prompted the company to take stock of its operations and ultimately exit the U.S. The company has kept its Asia-Pacific subsidiary, known as TuSimple China.
Tied up funds and mistrust
TuSimple China is counting on accessing the cash that it has left. Global TuSimple CEO Cheng Lu told TechCrunch the company has about $450 million in cash.
And TuSimple continues to plow through capital. The Chinese subsidiary’s annual operating expenses exceed $100 million, or about $8 million a month, according to a declaration by Lu in a court filing from January 2024.
Today, the bulk of the $450 million that remains in U.S. accounts is largely inaccessible due to three lawsuits, including a shareholder class action the company is close to settling for $189 million. A temporary restraining order issued by a California district court in January is still in effect, blocking TuSimple from moving assets outside of the U.S. except for transfers that are in the course of the company’s business.
TuSimple has argued it should have full access to those funds. The company needs to transfer money freely to China in order to “commercialize autonomous driving technology” there, Lu said in a June 2024 declaration sent to the U.S. District Court of the Southern District of California.
“TuSimple China will be the principal operating asset of TuSimple and, for the foreseeable future, the sole means by which TuSimple’s shareholders — including many U.S. investors — may benefit from the commercialization of TuSimple’s autonomous driving technology,” Lu said in the June court filing.
The declaration says nothing about animation and gaming. When asked about this, Lu said animation and gaming fall under the scope of commercializing autonomous driving technology.
“The words are ‘commercializing the technology,’ and we’re trying to commercialize technology,” Lu said. “If you commercialize, that means you make money off the technology, and we’re trying to make money off it, plain and simple.”
In letters to the TuSimple board and conversations with TechCrunch, concerned shareholders say they have little faith in management to generate value for them, and that the delisting and U.S. shutdown should have been an opportunity for the company to liquidate and redistribute wealth back to them.
“The company’s autonomous trucking operations appear to still be in the development state at best despite running over $1.8 billion in accumulated losses,” wrote Camac Partners, an investor with a 5.6% stake in TuSimple, in a letter to the board on May 30. He urged the board to keep TuSimple’s funds in the U.S. to protect the company assets for the benefit of all shareholders.
If the dispute turns into another lawsuit, TuSimple could be further delayed from transferring funds back to China. But the clock is ticking. TuSimple filed at the end of August to deregister with the SEC. While TuSimple has been delisted for nine months, the company is still registered with the SEC, which means it remains under U.S. scrutiny. Once the money goes to China, shareholders in the U.S. will have no recourse to claw back funds from their original investment.
The international wrestling match over TuSimple’s assets comes as foreign direct investment into China has seen 12-month lows, and Chinese VCs with U.S. money have left the country amid geopolitical tensions. Chinese firms are looking for creative ways to attract outside capital.
Rolling back AVs, scaling up animation
As TuSimple pushed for those U.S.-based funds, its AV operations in China were in flux.
TuSimple China had in late 2023 begun beefing up its autonomous driving team in anticipation of shutting down U.S. operations, several sources told TechCrunch.
It was that ramp up that made what happened in early 2024 so unexpected.
In late January, roughly 10 days before the Chinese New Year the following month, TuSimple announced a mandatory “long holiday” for employees, according to the accounts of several former employees who spoke to TechCrunch on condition of anonymity. That long holiday effectively turned into a layoff that affected hundreds of workers in the company’s core autonomous vehicle business, according to several former employees. TuSimple told employees that if they voluntarily left the company, they would receive severance. Sources say the information about severance was communicated verbally during an all-hands, so there was no written notice.
Sources also tell TechCrunch that TuSimple China’s headcount dropped from 700 to 170, but that some employees were hired back for the animation program.
Lu has denied that TuSimple laid off staff. In an interview with TechCrunch, Lu said around 500 employees, including chief technology officer Naiyan Wang and other core tech employees, resigned en masse and of their own accord between February and May.
Lu did not provide a reason, but noted that the temporary restraining order, issued in January, caused TuSimple to lose strategic autonomous trucking partnerships in China. Lu did not confirm the nature of those partnerships, but in a January court filing, the executive said TuSimple China’s budding partnership with the Port of Shanghai to test self-driving technology was at risk if the temporary restraining order blocked the company from sharing proprietary data with the port’s fleet management system. Lu’s declaration also noted the temporary restraining order threatened two contracts to license the company’s advanced driver assistance technology to truck manufacturers in China, as well as TuSimple’s ongoing collaboration with Nvidia.
Lu confirmed to TechCrunch that TuSimple is no longer running self-driving operations in the country, although he added the company is still actively looking for strategic partners to help the company develop self-driving tech.
Meanwhile, TuSimple spent much of 2024 licensing entertainment IP and staffing up its new animation and gaming business segment, according to public job listings and interviews with former employees. Lu told TechCrunch that today there are around 250 employees at TuSimple China — all of whom work on both self-driving and animation and gaming.
Throughout June, July, and August, TuSimple China posted new job listings in search of staff with experience in video game development and animation. The roles included titles like video editor, film director/screenwriter, game publisher, generative AI-focused backend engineer and anchor for live broadcasting, according to public postings. One description mentions TuSimple is working on a project related to martial arts and that the company owns “multiple Chinese top IP.”
There are also job postings that could ostensibly be for self-driving, such as a crawler engineer, corporate development and strategy associate, and controller for the finance team.
Despite protests from some shareholders, TuSimple has defended its actions, arguing that both a national security agreement in 2022 with the Committee on Foreign Investments in the United States and temporary restraining orders from California courts have made it next to impossible to run self-driving operations in China. One temporary restraining order was lifted July 31; the other remains in place.
Lu argued the pivot to animation and gaming, a fast-growing $600 billion industry, was a logical use of the company’s self-driving technology infrastructure and AI, one that could provide TuSimple with near-term profits.
“We’re taking that know-how and the technology, and we’re going to generative AI by developing high quality content, video games, and animation faster using AI that in the near term we believe can generate a significant amount of return for our shareholders,” Lu said.
Animation and gaming also happens to be of personal interest to Chen, according to multiple investors, former employees, and Lu.
Chen has been a central figure throughout TuSimple’s nine-year history that extends beyond his co-founding status. His connections helped the company land a critical investment in 2021 from Sina Corp., which runs China’s biggest social media platform Sina Weibo. Charles Chao and Bonnie Yi Zhang, respectively the CEO and CFO of Weibo, were both members of TuSimple’s board. Sun Dream, an affiliate of Sina, was TuSimple’s largest shareholder for a time, although that investment did lead to an investigation by the Committee on Foreign Investment in the United States.
Chen also has a personal connection with Yunli Liu, who was Sina’s head of investment and backed the founder’s web gaming company, Beijing Blue Brothers, which Sina later acquired. Sina also controls the IP of the Three Body Problem.
Chen’s intertwined business interests have at times raised the ire of shareholders and caught the attention of U.S. regulators as well.
In their July letter to the board, the group of shareholders alleged Chen might be personally benefiting from TuSimple’s move to animation and gaming. They pointed to four private animation and gaming businesses that are connected to Chen and his other businesses, TuSimple and Hydron, a Chinese startup launched in March 2021 to build autonomous-ready hydrogen trucks.
One of businesses, Beijing BearBear Nation Cultural Media Co., founded in November 2020, lists Chen as the CEO and legal representative. A TuSimple email address was used as the company’s registered contact in 2020 and 2021. Another, Shanghai Xia Dao Cultural Communication Co., had the same physical address as TuSimple Beijing when it was founded in December 2023. Its address today is the same as Hydron’s in Shanghai. The company’s CEO Cheng Zhang and head of finance Xiaoning Tian also overlap with TuSimple and Hydron.
The overlap between Hydron and TuSimple, both owned by Chen, has also been the subject of investigation. In 2022, after a Committee on Foreign Investment in the United States probe, TuSimple revealed that its employees spent paid hours working for Hydron in 2021, and that confidential information was shared with the company. After reaching a national security agreement that would keep TuSimple’s autonomous driving data, technology, and R&D in the U.S., the board voted to oust one of its co-founders. But not the one with direct ties to Hydron. Instead, the board fired its CEO, Xiaodi Hou, who claimed the removal was done without cause.
The subsequent stock fall and lack of disclosure around Chen’s relationship with Hydron resulted in a class action lawsuit from shareholders in November 2022 that’s still open today.
The concerned shareholders in the July board letter also called attention to two new subsidiaries TuSimple formed in May 2024, both of which fall under the “cultural and art industry” category. They said that TuSimple’s lack of disclosure around the new subsidiaries, coupled with Chen’s other business connections might be evidence of alleged impropriety.
TuSimple did end up disclosing its pivot to AI animation and gaming on August 14, two weeks after the shareholder letter was sent.
Lu confirmed the existence of the subsidiaries to TechCrunch and refuted the idea that TuSimple needed to disclose a potential business avenue with shareholders before it was materially important. He pointed to Apple’s Project Titan car project, which the company also never divulged to shareholders publicly, and noted that TuSimple actually started developing computer vision for advertising in 2015.
“Companies internally look at new opportunities all the time,” Lu said.
