Is Huida’s biggest crisis coming? Jen-Hsun Huang risks losing CEO position amid scandal, stock price plummets against trend

After Huida's board of directors launched an investigation into whether CEO Huang Renxun was a target of Chinese intelligence agencies, the market paid close attention to Huang Renxun's future. Amid the uncertainty, Huida's stock price continued last week's selling trend, falling 4.27% on Monday (9th) to close at $178.67. Despite this, Huida's board of directors has stated that "there is no reason to believe that national security or Huida's secrets have been compromised" and has deep confidence in Huang Renxun and his leadership team. The market also pointed out that Huang Renxun may not necessarily resign due to this investigation, because he has too much influence on Huida. There is no clear deputy in the company, and analysts and investors have almost never discussed the issue of succession. It is believed that this investigation may lead to Huida’s governance changes, including the development of a transition backup plan.

"CNBC" reported that Melius Research analysts pointed out in a research report on Monday: "The problem facing Huida is that Huang Renxun has no clear successor, and we originally expected him to stay in this position for at least 10 years." Stacy, an analyst at Bernstein Rasgon also said on Monday: "Huida is Huang Renxun, Huida is Huang Renxun." He pointed out that Huang Renxun almost controls the entire company from top to bottom, and "almost everything is handled by Huang Renxun."

For a long time, Huida has maintained a flat, non-hierarchical organizational structure. Huang is deeply involved in the company's daily operations and often speaks on behalf of the company at meetings with world leaders and industry seminars. In addition to being co-founder and CEO, Huang Renxun is also the president of Huida.

Compared with other founders in the technology industry, Huang Renxun's actual control over Huida is quite limited. He holds just over 3% of the outstanding shares and is one of 11 members of Huida's board of directors, which does not have a formal chairman position.

In addition, Huang Renxun was not specifically listed as a key person among the risk factors listed in Huida's financial filings. Instead, the company said: "We rely heavily on the services of our long-tenured management team."

Still, Huang's influence is so unquestionable that the issue of succession has almost never been a topic of public discussion among analysts and investors.

Rothschild & Co. Redburn analyst Timm Schulze-Melander wrote in a research note on Monday that Huang may be forced to step down as CEO if the board's investigation uncovers circumstances that are "significantly more serious" than an undisclosed relationship. However, Schultzmelander pointed out that Huang may not resign as a result of the investigation and emphasized his importance to Huida.

Schulzmelander said Huida's board "must demonstrate independence and protect shareholders without destabilizing a company whose success is unusually closely tied to its founders." "The initial statement from the board showed that they were trying to do both at the same time," he said.

Several analysts said the investigation could prompt Huida to make corporate governance reforms, including developing a backup plan to deal with a leadership transition.