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| Pictured is Tucson's future self-driving truck. |
As the U.S. and China increasingly compete in the high-tech space, investing in any Chinese technology-related company has become increasingly risky on Wall Street. An example is the stock price of a self-driving truck company that was once regarded as the darling of investors due to investigations by U.S. security agencies in recent years.
The Wall Street Journal reported on February 1 that the Committee on Foreign Investment in the US (Cfius for short) urged the US Department of Justice to consider imposing sanctions on TuSimple (Nasdaq: TSP), a self-driving truck company listed in the US. ) charged with economic espionage.
The proposed criminal charges were filed in late November over suspicions that the San Diego, California-based company's two founders and current chief executive officer improperly transferred funds and technology to Chinese start-up Hydron Inc. Hydron Inc. is a self-driving hydrogen-powered truck company.
In October 2022, the FBI, the Securities and Exchange Commission, and the Committee on Foreign Investment in the United States simultaneously investigated Tucson Future.
The CFIUS investigation concluded that the dealings between future Tucson executives and Hydron Inc. may have violated U.S. laws prohibiting economic espionage and theft of trade secrets, among other violations.
The three future TuSimple executives who may be charged are the company's co-founders Hou Xiaodi, Chen Mo, and current CEO Lu Cheng. Chen Mo is a Canadian citizen, and the other two are American citizens.
The Committee on Foreign Investment in the United States is a joint investigative agency led by the Treasury Department, including the Justice Department, Defense Department and other federal departments, responsible for reviewing foreign investment that poses a potential threat to US national security.
The Biden administration has ordered a series of measures, including sweeping restrictions on the supply of state-of-the-art chips to Chinese companies last October under the Chips and Technology Act of 2022, and a recent halt to most export licenses to Chinese tech giant Huawei, aimed at Keep the U.S. on edge in the U.S.-China technological competition.
Tucson Future denies the allegation. On Feb. 1, a company spokeswoman said any information its employees shared with Hydron Inc. was in line with industry standard practice and would not allow foreign rivals to copy its technology.
“We see the same type of information being shared with Hydron as other potential truck manufacturing partners, so these vehicles can be customized to be compatible with our technology,” said Tucson Future spokeswoman Megan Strader. ) told Bloomberg News. "This information does not allow outside entities to replicate the core of TuSimple - our own software technology," she added.
As of the time of writing, Tucson Future has not responded to VOA's query on the case.
Has been investigated by CFIUS before going public
The 2015-founded company TuSimple, which specializes in autonomous trucks, has R&D centers in both China and the US. It will be listed on Nasdaq in the United States in April 2021.
As early as 2021, the Committee on Foreign Investment in Tucson launched an investigation into Tucson Future. One of the reasons was that a Chinese shareholder invested a lot of money and controlled two board seats, which aroused the attention of US security agencies.
The Chinese shareholder was Charles Chao, chairman of the Chinese technology conglomerate Sina Corp., who at the time controlled a 20 percent stake in TuSimple and two seats on the board. In addition to investing in Hydron, Cao Guowei also maintains tight ties with Hou Xiaodi and Chen Mo.
As a result of that investigation, the Committee on Foreign Investment in the United States asked Cao Guowei to give up the two seats he controlled on Tucson's future board of directors and restrict the company's Chinese division from obtaining source code and algorithms including self-driving business.
TuSimple's filing with the U.S. Securities and Exchange Commission on February 18, 2021 shows that TuSimple has reached an agreement with CFIUS. After the company has resolved the above issues, CFIUS has determined that there are no unresolved national security concerns.
As part of the agreement, Tucson appointed a former U.S. national security official as a company director, established a government security committee, and regularly met and reported to CFIUS.
“CFIUS closed the investigation by removing the Chinese executive from the board and giving the U.S. government some oversight,” Bloomberg News reported.
The problem is with this Chinese startup
In June 2022, Tucson Future co-founder Mo Chen founded Hydron Inc, a hydrogen truck company with ties to China, in Los Angeles, California. Chen Mo spends most of his time in China. The startup is backed by Chinese investors.
Hydron operates in China and is building hydrogen-powered semi-trucks, the Journal said.
Hydrogen energy development is a project encouraged by the Chinese government. In September 2020, China's five national ministries and commissions jointly issued the "Notice on the Demonstration Application of Hydrogen Fuel Cell Vehicles", and the shortlisted hydrogen fuel cell vehicle demonstration cities can receive up to 1.87 billion yuan in rewards.
“Beijing has been heavily supportive of this hydrogen-powered vehicle technology, so it would certainly make sense to set up such a company in China to take advantage of government incentives,” said Seeking Alpha, a media outlet in the investment community.
On October 31, 2022, TuSimple's board of directors fired Hou Xiaodi, TuSimple's co-founder and then CEO, after discovering important evidence that TuSimple had transferred the company's confidential information to Hydron and its partners. The stock price plummeted by nearly half that day. This move was interpreted by the media as Tucson’s self-cut behavior after being investigated by the US government in the future.
But things were quickly reversed. In November, the two founders of TuSimple Future, Hou Xiaodi and Chen Mo joined hands to remove TuSimple Future’s board of directors by using the dual-shareholding structure designed when TuSimple Future went public, and then hired three independent directors to form a new board of directors. One of them The Government Security Director is responsible for liaison with CFIUS.
"From a corporate governance standpoint, it is certainly unethical and likely illegal for Tucson's future founders to set up Hydron and then begin a partnership between the two companies without informing the board of directors. ’ said Seeking Alpha. "Additionally, considering all the US national security worries, the move appears less prudent given that Hydron is situated in China, where it may be vulnerable to meddling, from local regulators."
A conviction for economic espionage, which requires prosecutors to prove that a foreign government benefited from the activity, carries a maximum penalty of 15 years in prison.
The Wall Street Journal said it was uncertain whether the U.S. Department of Justice would charge economic espionage in the case. "In recent years, the U.S. Department of Justice has brought only a handful of such cases," the report said.
Seeking Alpha reports that Tucson has no shortage of working capital in the future, but "the bigger issue will be sorting out the relationship with Hydron, which could mean severing ties with the company and selling its Chinese division, two Actions may be necessary both to salvage relations with CFIUS and to avoid economic espionage charges."
Tucson's future stock price is skinny
Tucson's future shares closed at $2.40 on Tuesday (February 7), down more than 80% from a year ago. The company's 2021 IPO price is $40 per share.
"The stock price is skinny," said Yao Wang, head of an asset management company in New York. "Concerns associated with stocks tied to China include not only policy risks but also risks associated with a decoupling between China and the US as well as risks associated with US government restrictions."on China's technology exports. For any such stock, if there are so many mines there, which line may be stepped on."
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