Tesla self-driving truck rival TuSimple raises $1 billion in IPO valuing it at $8.5 billion

Shares in the group fell as much as 17% before bouncing back to settle 4% lower once trading began on the Nasdaq COMP, +1.37%. TuSimple’s hotly-anticipated initial public offering bucked recent trends by not going public through a merger with a blank-check, special-purpose acquisition company.

The group says that its self-driving trucking technology makes it well-positioned to disrupt the $4 trillion global freight market. It has 5,700 reservations for self-driving trucks built by Navistar NAV, -0.02% using its artificial-intelligence platform, scheduled to go into production in 2024, with 70 trucks already on the road in the U.S. and China.

But it will face stiff competition on the way to AI trucking dominance, including from electric-car maker Tesla’s TSLA, +0.74% Semi truck as well as projects from Chinese-based manufacturer XPeng XPEV, -4.55% and Waymo, the self-driving arm of Google parent Alphabet GOOGL, +2.10%.

One of TuSimple’s key rivals in the trucking space is Aurora. Founded by a former self-driving engineer from Google, Aurora is partnered with Volvo Trucks VOLV.B, +2.65%, and has backers including Hyundai 005380, -0.86% and Amazon AMZN, +1.59%.

TuSimple has strong ties to electric-vehicle leader Volkswagen VOW, +1.64% through a partnership with its trucking subsidiary, Traton 8TRA, , as well as Navistar NAV, -0.02%, which also owns more than 6% of the Class A shares. Traton is in the process of buying the remainder of Navistar that it didn’t already own, and will launch a global business with TuSimple in Europe.

“We are very excited about being part of the global Volkswagen family,” Pat Dillon, TuSimple’s Chief Financial Officer, told MarketWatch. “While our initial models will be diesel trucks, we know that the future is going to be in electrified drivetrain.”

TuSimple’s other partners are across the trucking, rail, and logistics industries, and include relationships with Canadian National Railway CNR, +0.57%, diesel engine giant Cummins CMI, +0.30%, and transportation services company Penske PAG, +0.59%.

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A total of 33.8 million TuSimple shares began trading on the Nasdaq Global Select Market today under the symbol “TSP,” with 27 million shares offered by TuSimple and 6.8 million from Chinese backer Sun Dream, the group’s single largest shareholder.

The offering is being led by underwriters Morgan Stanley MS, +0.24%, Citigroup C, -0.82%, and JPMorgan JPM, +0.53%, and should make a fortune for its two co-founders, Mo Chen and Xiaodi Hou.

After completing a doctorate at CalTech in Computation and Neural Systems, Hou founded TuSimple with Chen, a Canadian entrepreneur, in 2015. The two each owned around 12% of the company’s shares as of the IPO, worth more than $1 billion.

Based on a share price of $37, the company said in its filings with the U.S. Securities and Exchange Commission that it expected to raise $985.7 million from the public offering and a $35 million private placement, accounting for underwriting costs and other expenses. The $40 share price brings the total amount raised to $1.08 billion, the company said on Thursday.

The company counts the venture arm of logistics group UPS UPS, +2.06% among its backers, and said it would use the proceeds of the IPO for working capital, including funding operating needs, and may use a portion to acquire or invest in complementary products, technologies, or businesses. It’s ready to go on a hiring spree, with 400 open positions to join their already 900-person strong workforce.

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“It was really important to raise the capital to invest in our business,” Dillon said. “The vast majority of our capital over the next three years is going to people based in San Diego and Tucson who are developing our technology, who are working on our fleet of testing trucks, and starting to build both the technology and the commercial operations.”

TuSimple’s revenues have remained relatively minimal while its losses have mounted during rapid growth. The group reported a net loss of $198.8 million on revenue of $1.8 million in 2020, building on a loss of $145 million on revenue of $710,000 in 2019.

“We’ve invested approximately $300 million, roughly speaking, in getting the business to where it is, and the balance sheet that we have,” Dillon said. “Now we feel really good about controlling our destiny, and continuing to add on, build up the team, and get ourselves to commercialization.”

TuSimple listed stiff competition from rivals in an industry still in its early stages among the key risk factors in its filings. The company also highlighted a regulatory risk involving its large backer Sun Dream, tied to Chinese tech giant Sina, which owns social media network Weibo WB, -2.26%.  

Sun Dream, which owns 13% of the outstanding share capital following the IPO, is ultimately controlled by Charles Chao, the chair of Sina and one of TuSimple’s directors. Sun Dream’s 2017 investment in TuSimple sparked a probe by the Committee on Foreign Investment in the United States in March.