BEIJING, November 17 (TMTPOST) — TuSimple, a Nasdaq-listed self-driving trucking company, announced that its co-founder Chen Mo has returned as Board Chairman after gaining the control of the company with 59% of the voting power.
The company made announcements on Tuesday and Wednesday, saying that TuSimple co-founder Hou Xiaodi, ousted from the management in late October, had put shares of his companies under full custody of Chen, giving the latter the control of the trucking firm.
TuSimple has become a "controlled company' on Nasdaq and is exempt from complying with certain corporate governance requirements, including independent directors making up the majoirty of the board. There are only three founders on the board and no independent directors now.
On Oct. 31, TuSimple's board of directors fire Hou as CEO, President, and CTO, and chairman, citing wrongdoings. Hou denied any wrongdoing in a statement posted on LinkedIn. As a result, TuSimple's stock plunged 45 percent overnight to $3.39 per share by the closing of November 1, with a market value of about $762 million.
Last Thursday, TuSimple announced that the company's former chief executive officer Lv Cheng returned as CEO and president of the company.
According to TuSimple's website, the company currently has three directors, namely Chen Mo, Hou Xiaodi, and Lv Cheng. Before last Thursday, there were five directors on the board, namely Hou Xiaodi, and four independent directors -- Brad Buss, Karen C. Francis, Michelle Sterling, and Reed Werner. The four independent directors were removed in November.
In late 2021, TuSimple was reportedly reviewed by the Committee on Foreign Investment in the United States (CFIUS) because of the California-based company's connections in China.
According to TuSimple's Articles of Association, the Board of Directors is elected by shareholders with a relative majority of votes. And any proposal to remove members of the Board of Directors, or to replace an existing director with a new director, shall first be proposed by the Governance and Nominations Committee and then approved by the full Board of Directors.
Regarding the conflict between the process of personnel change and the company's articles of association, TuSimple explained in a Tuesday announcement that two of Hou's companies, White Marble LLC and White Marble International Limited, hold 13.36 million Class A shares and 1,200 Class B shares of TuSimple, with each Class A share carrying one vote and each Class B share carrying 10 votes.
The two companies reached an agreement with Chen last Wednesday, under which Chen has full authority to exercise shareholder rights on behalf of the two companies for a period of two years. The announcement said that after Chen received the voting rights of Hou's two companies, Chen's voting rights in TuSimple totaled about 59%.
The Wednesday TuSimple announcement further explained that Chen currently owns 19,734,600 Class A shares and 24 million Class B shares of TuSimple, representing a combined beneficial ownership of approximately 19.5% of the company's outstanding Class A shares and approximately 59.0% of the company's outstanding share capital with voting rights. As a result, Chen acquired control of the company last Wednesday.
As a result of these changes in ownership, TuSimple has become a controlled company as defined in NASDAQ Listing Rule 5615(c)(1), i.e., a company whose majority of the voting right is held by an individual or a company. A controlled company may choose not to comply with certain corporate governance standards. According to these standards, the Board of Directors should have a Compensation Committee, director nominees must be proposed by a majority of the Board of Directors (with only independent directors voting) or by the Nominating and Corporate Governance Committee, which is composed exclusively of independent directors.