20-F: Boqii Holding Limited Details Securities Registered Under Exchange Act in 20-F Filing

Boqii Holding Limited's 20-F filing details the rights of Class A ordinary shares and American Depositary Shares (ADSs) listed on the NYSE American LLC.

Summary

• Boqii Holding Limited, a Cayman Islands exempted company, has filed its 20-F report detailing information about its securities.
• The filing describes the rights of holders of Class A ordinary shares and American Depositary Shares (ADSs), each representing 15 Class A ordinary shares.
• As of March 31, 2024, the company had 160,729,482 ordinary shares outstanding, including 147,691,753 Class A ordinary shares and 13,037,729 Class B ordinary shares.
• The company has a dual-class share structure where each Class A ordinary share has one vote and each Class B ordinary share has 20 votes.
• Class B ordinary shares are convertible into Class A ordinary shares, but not vice versa.
• The Bank of New York Mellon serves as the depositary for the ADSs.
• ADS holders have the right to instruct the depositary on how to vote the underlying shares.
• The company's corporate structure involves unique risks to investors in the ADSs, as they are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by the company's subsidiaries and the VIEs.
• The amount of revenues generated by the VIEs accounted for approximately 71.2% of the company's total net revenues for the year ended March 31, 2024.
• Total assets of the VIEs, excluding amounts due from other companies in the Company, equaled to approximately 44.8% of the company's consolidated total assets as of March 31, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While it provides necessary information about the company's structure and operations, it also highlights several risks and challenges, including regulatory uncertainties, reliance on VIEs, and potential tax liabilities. The financial results show a decrease in revenue and gross profit, which is a negative indicator. The sentiment is neutral overall, as the document primarily serves to disclose information rather than promote a positive outlook.

Positives

• ADS holders have the right to instruct the depositary on how to vote the underlying shares, providing some level of influence.
• Class B ordinary shares are convertible into Class A ordinary shares, which may increase the number of Class A shares over time.

Negatives

• ADS holders do not have the same rights as direct shareholders under Cayman Islands law.
• The dual-class share structure concentrates voting power in the hands of Class B shareholders, limiting the influence of Class A shareholders.
• The company relies on contractual arrangements with VIEs, which may not be as effective as direct ownership.
• The company's corporate structure involves unique risks to investors in the ADSs, as they are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by the company's subsidiaries and the VIEs.

Risks

• The dual-class share structure limits the ability of Class A shareholders to influence corporate matters.
• The company relies on contractual arrangements with VIEs, which may not be as effective as direct ownership and are subject to regulatory risks in China.
• Changes in PRC laws and regulations could affect the enforceability of contractual arrangements with the VIEs.
• The company's ability to pay dividends depends on the dividends paid by its PRC subsidiaries, which are subject to restrictions under PRC laws and regulations.
• The company may be classified as a PRC resident enterprise, which could result in unfavorable tax consequences to the company and its non-PRC shareholders.
• Trading in the company's securities may be prohibited under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB is unable to inspect the company's accounting firm.

Future Outlook

The company intends to use the net proceeds from the sales of ADSs for working capital and general corporate purposes.

Industry Context

The document provides insight into the regulatory environment and operational structure of a Chinese company listed in the U.S., operating in the pet industry, which is subject to specific regulations regarding foreign investment and data security.

Comparison to Industry Standards

• The dual-class share structure is a common feature among tech companies, aiming to maintain control with founders, similar to companies like Alphabet (Google) and Meta (Facebook).
• The use of VIE structure is a common practice for Chinese companies seeking foreign investment in sectors where direct foreign ownership is restricted, mirroring the structures used by Alibaba, Baidu, and JD.com.
• The company's reliance on third-party e-commerce platforms is similar to many other Chinese retailers, who leverage platforms like Tmall and JD.com to reach a wider customer base.
• The company's focus on building an online community and engaging with customers through content is a strategy employed by many successful e-commerce businesses, such as Pinduoduo and Xiaohongshu (Red).

Related Party Transactions

• The company purchased goods from Jiangsu Nanjing Agricultural University Animal Pharmaceutical Co., Ltd., an equity investee, in a total amount of approximately RMB3.89 million (US$0.54 million).
• The company made advance payments totaling RMB5.4 million (US$0.75 million) to Nanjing Animal Pharmaceutical for the purchase of goods.
• The company made an advance payment of RMB 5.5 million to Superb Origin International Limited, a shareholder, for the purchase of goods.
• The company granted Shanghai Guangcheng Information a short-term loan with a total principal amount of RMB33.4 million (equivalent to USD 5 million), bearing an interest rate of 3.5% per annum.
• The company obtained a total loan facility up to USD 5 million from Shanghai Guangcheng Information, with interest bearing at 3.5% per annum.

Stakeholder Impact

• Shareholders may experience volatility in the trading price of the ADSs.
• Shareholders may face difficulties in enforcing their rights due to the company's incorporation in the Cayman Islands and the location of its assets and operations in China.
• The dual-class share structure limits the ability of Class A shareholders to influence corporate matters.
• Employees may be affected by changes in compensation and benefits, as well as the company's ability to attract and retain qualified personnel.
• Customers may be affected by changes in the quality and availability of products and services, as well as the company's ability to provide a positive shopping experience.

Next Steps

• The company will need to monitor and comply with evolving PRC laws and regulations, particularly those related to data security and foreign investment.
• The company will need to address the material weaknesses in its internal control over financial reporting.
• The company will need to manage its relationships with brand partners and third-party e-commerce platforms.
• The company will need to continue to diversify its product offerings and improve its profitability.
• The company shall fulfill the filing procedures with the CSRC for any future offshore offering as per requirements of the Overseas Listing Trial Measures.

Key Dates

Keywords

ADS, Class A ordinary shares, Class B ordinary shares, VIE, dual-class share structure, Cayman Islands, Boqii Holding Limited, securities, voting rights, depositary