Opinion: IPO to espionage: The rise and fall of a tech startup

Richard Baker

Just before I started high school, our basketball coach decided to hold an unsanctioned scrimmage against another school. Both coaches told their players to keep it a secret, but as it happens, one of our players told someone at another school, and sanctions came raining down on both schools.

Good intentions sometimes blow up when rivals have evil intentions. This is one of the greatest risks in technology research and development.

In February 2022, just a few days after telling the U.S. government that it would stop sharing sensitive technology with its Chinese partners linked to the Chinese military, TuSimple transferred a large batch of data to a Chinese firm, which then passed it on to the Chinese army. This led to a huge financial loss for many American investors and created a risk to our national security.

When TuSimple had its initial public offering in April 2021, it quickly gained momentum because it was the first autonomous trucking company to go public on the Nasdaq exchange. They planned to become a world leader in developing self-driving trucks that would address the driver shortage problem, reduce freight costs and support the U.S. military in utilizing driverless trucks. But the Chinese founders had evil intentions.

The Chinese businessmen started the company in the U.S. because of the country’s more favorable regulatory environment, the fact that the world’s largest trucking companies operate here and the access to nearly unlimited investor cash. They quickly raised over $1.4 billion from investors and signed contracts with Volkswagen, United Parcel Service and U.S. Xpress Enterprises.

They had already hired some of America's greatest minds to develop these systems, and after their successful IPO, they had the cash to begin testing them. Less than 10 months later, they signed a contract in the name of a shell corporation with a Chinese state-owned company that provides driverless technology to a Chinese military university.

According to The Wall Street Journal, the San Diego-based TuSimple began sending its Chinese partners server dimensions, brake designs, sensors, steering, power supply, chip design, schematics and the data from TuSimple’s Texas test drives, which were translated from English to Chinese.

Within 18 months of selling stocks, TuSimple shut down its U.S. operations, fired its U.S. workers, sold its trucks and delisted from the Nasdaq, but not until it had transferred all of the confidential American research and hundreds of millions of dollars from American investors from the company’s accounts to China.

This story is a sad example of the weaknesses in U.S. laws that protect American technology and investor capital. I am not a politician, nor do I work for the government, but someone must come up with better firewalls and controls to prevent this type of thing from happening. Investing is hard enough when the companies are really trying to make a profit, let alone for a scam like this.

Technology will forever continue to be a great sector for investors to keep in their portfolios, but this story illustrates the importance of diversification. I want to think this is an isolated event, or at least I hope so. Thank goodness I never invested in it.

Our high school basketball team wasn’t allowed to play in districts that year because of the unsanctioned scrimmage. Had the players met in a park without coaches, no rules would have been broken. Of course, if my neighbor uphill from me had been smart enough not to share sensitive information with our rivals, it would have been just fine. Maybe I hold grudges too long.

Richard Baker, an accredited investment fiduciary, is the CEO and executive wealth adviser at Fervent Wealth Management LLC in Springfield. He can be reached at richard@ferventwm.com.