Xiaodi Hou’s Battle for Control of TuSimple
TuSimple, a leading autonomous trucking company, has been embroiled in a bitter dispute over control and governance. At the center of this battle is Xiaodi Hou, co-founder and former CTO, who claims that he should regain control of his shares after a two-year proxy agreement expired.
The Proxy Agreement
In 2022, Hou signed an irrevocable proxy agreement with co-founder Chen, giving him voting power over 13.4 million Class A common stock shares and 12 million Class B common stock shares. These shares accounted for 29.7% of TuSimple’s total voting power.
The agreement was set to expire after two years, but Hou claims that it has terminated, allowing him to regain control of his shares. However, Chen has maintained that the proxy agreement remains in effect and that he still controls 57.9% of the company’s voting power.
Chen’s Claim
In a Securities and Exchange Commission (SEC) filing dated November 9, 2024, Chen reaffirmed his claim to Hou’s shares, stating that while the irrevocable proxy had terminated, the voting agreement remained in full force and effect. This means that even though Hou may possess the shares, he still needs to vote as directed by Chen.
TuSimple’s Response
TuSimple has included similar language about the deal with Hou in its proxy statement to shareholders ahead of the upcoming annual meeting. The company is seeking to renew the six current directors and create a classified board, which would prevent shareholders from replacing the entire board in a single vote. This could effectively entrench Chen’s control over TuSimple.
The Hearing
A hearing has been scheduled for December 2 to expedite the review of Hou’s complaint and decide on his request to postpone TuSimple’s annual meeting.
Background
TuSimple, founded in 2015 by Xiaodi Hou and Chen, has made significant strides in autonomous trucking technology. However, the company has faced intense competition and regulatory challenges. In January 2024, TuSimple voluntarily delisted from the stock market and failed to file quarterly updates with the SEC.
Industry Implications
The dispute between Hou and Chen has raised concerns about governance and control within the startup ecosystem. The outcome of this battle may have far-reaching implications for startups, investors, and regulatory bodies.
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