TuSimple drives down U.S. off ramp. Nasdaq exit next?

The autonomous truck technology company said it will wind down its U.S. operations to focus on China, as its cash runs low

Key Takeaways:

• TuSimple will lay off three-quarters of its U.S. workforce as it withdraws from the market after a stream of setbacks over the last year
• The U.S. wind-down could presage a privatization from the Nasdaq as the company seeks to attract new funding from Chinese sources

By Doug Young

Life for TuSimple Holdings Inc. (TSP.US) has been anything but simple since it listed on the Nasdaq in 2021. First the autonomous trucking company wowed investors with the display of its technology performing well in an important road test at the end of 2021. Then it became mired in controversy a year later when its top executive was fired over allegations of working with a Chinese company without the board’s authorization.

In between those two big events, reports also emerged that TuSimple was considering a sale of its China business to focus on its more advanced U.S. operations. Most recently, the company faced scrutiny – and a possible criminal investigation – related to economic espionage allegations by the U.S. national security regulator.

All the controversy prompted TuSimple to announce in June it was exploring “strategic alternatives” for its U.S. business, which we interpreted to mean it was looking to sell the business. But now it seems like we were wrong. Or more likely we were right, but TuSimple simply couldn’t find a buyer for its U.S. business. As a result, the company announced last week it will wind down its U.S. operation and withdraw from the market, according to a stock exchange filing.

The announcement represents a huge reversal for a company that once looked set to revolutionize autonomous truck driving not only in the U.S., but potentially globally. From a business perspective, however, this latest move actually seems like the best way forward for TuSimple.

It will pave the way for the return of company co-founder Hou Xiaodi, who was serving as TuSimple’s chairman, CEO and CTO at the time of his sudden firing about a year ago. And equally important, it will clear the way for TuSimple to continue its collaboration with Hydron, a Chinese hydrogen-powered truck maker, whose undisclosed collaboration with TuSimple led the board to fire Hou.

If TuSimple ultimately travels down this new road, it’s quite possible it could soon de-list from the Nasdaq, ending its brief life as a U.S.-traded company. TuSimple was a highflier when it made the listing in 2021, in a deal that initially valued it at $8.5 billion. But all the air has come out of its tires since then. The stock has lost about 97% of its value, and had a market cap of just $230 million and a price-to-book (P/B) ratio of 0.3 at the end of last week.

TuSimple certainly isn’t alone in facing such setbacks. Another up-and-comer, Embark Technology, was privatized this year for a mere $71 million, just two years after going public. Aurora Technology (AUR.US) is one of the few companies in the category that remains listed, currently commanding a P/B ratio of 1.93.

TuSimple’s shares actually rallied 15% in the two trading days after the announcement last week, though they later gave back more than half of those gains. Still, the rally looks like a combination of investor relief that the company is finally getting out of the U.S. market where it has always faced scrutiny due to its China ties. Many investors may also be betting the company could privatize soon, and are hoping to earn some money from the big premiums that typically come with such privatization offers.

U.S. wind-down

Next, we’ll take a more detailed look at TuSimple’s latest announcement and explore what the road ahead for this company might look like. We’ll start by noting the company’s revenue has dropped to nearly nil, following its earlier decision to re-evaluate its U.S. operations that were its main source of income, albeit not much.

The company’s loss in the third quarter actually narrowed to $221 million from $334 million a year earlier, mostly because it froze most of its operations and therefore its cost of revenue also fell to almost nil. The company had $777 million in cash and short-term investments at the end of September, down from about $1 billion a year earlier, meaning the closure of the U.S. operation could buy it a few more months to find a new money source before it exhausts its cash.

According to its latest announcement, TuSimple’s board on Nov. 30 authorized the company to cut its U.S. workforce by 75%, or about 150 employees. The remaining 50 U.S.-based employees will work on winding down the company, and will presumably be laid off after that. That will leave the company with about 650 Asia-based employees.

TuSimple said it would incur a relatively modest charge of $7 million to $8 million related to the U.S. wind-down, most of which would be recorded in the fourth quarter.

Once it leaves the U.S., TuSimple will be left with an Asian operation that is mostly based in China. Reports last year saying that TuSimple might be looking to sell its China operations noted that such a sale could fetch up to $1 billion. Such a figure probably looks too optimistic now given all the recent setbacks for autonomous driving technology.

But that said, the China business could still be relatively promising. In June, TuSimple said it completed its first semi-truck run in China on open public roads without a human driver or human intervention. That means commercialization is probably still at least a few more years away, though at least it’s moving in the right direction.

Apart from allowing Hou Xiaodi’s return to the company in his more familiar home market, moving its focus to China will also almost certainly provide TuSimple with huge government support. That’s because China is heavily promoting such autonomous driving technology. At the same time, it’s also strongly supporting cleantech like the hydrogen-powered truck technology being used by Hydron, which presumably would become one of TuSimple’s main partners going forward.

Its operation in two areas with such strong government support means TuSimple should be able to easily attract new funding from China’s vast web of state-owned enterprises to keep its operations going. It would also probably get government backing to list its shares on one of China’s stock markets for high-growth startups. But before it can do any of that, it would need to de-list from the Nasdaq, leading to our earlier prediction that the company’s days as a U.S.-listed company could be numbered.

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