F-1: Luokung Technology Corp. Files for Resale of 3.85 Million Ordinary Shares

Luokung Technology Corp. has filed a registration statement for the resale of up to 3,850,792 ordinary shares by certain selling shareholders.

Summary

• Luokung Technology Corp., a spatial-temporal intelligent big data services company, has filed a registration statement for the resale of up to 3,850,792 ordinary shares.
• These shares are being offered by existing shareholders, including those who received shares through debt-to-equity conversions and new investors.
• The company will not receive any proceeds from the sale of these shares.
• The shares being registered for resale are considerable relative to the company's public float and could negatively impact the trading price.
• Luokung operates primarily in China through subsidiaries and variable interest entities (VIEs), which involves unique risks for investors.
• The company's VIE structure is subject to regulatory risks in China, and changes in Chinese laws could materially affect the company's operations and the value of its shares.
• The company is also subject to risks related to data security and cybersecurity regulations in China.
• Luokung is an emerging growth company and a foreign private issuer, which means it is subject to reduced reporting requirements.
• The company's financial statements for 2021, 2022 and 2023 show significant losses.
• The company has made transfers to subsidiaries in the past, but has no current intentions to distribute further earnings.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While the company is involved in promising sectors like smart transportation and carbon neutrality, the significant financial losses, regulatory risks, and potential stock price dilution due to the resale of shares create a negative outlook from an investment perspective.

Positives

• The company has secured funding through debt-to-equity conversions and new investments.
• Luokung is actively involved in developing smart solutions for both vehicles and roads, positioning itself in the smart transportation sector.
• The company is working on remote sensing data processing services for carbon neutrality and natural resource asset management.
• Luokung has established a remote sensing data engine that integrates high-resolution remote sensing, HD maps and various IoT sensor data.

Negatives

• The company has a history of significant losses.
• The VIE structure introduces substantial regulatory and legal risks.
• The resale of a large number of shares could negatively impact the stock price.
• The company is subject to complex and evolving Chinese laws and regulations.
• The company's holding company structure may limit the payment of dividends.
• There are uncertainties regarding the interpretation and application of current and future PRC laws.
• The company faces risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers.

Risks

• The VIE structure is subject to regulatory risks in China, and changes in Chinese laws could materially affect the company's operations and the value of its shares.
• The company is subject to risks related to data security and cybersecurity regulations in China.
• The resale of a large number of shares could negatively impact the stock price.
• The company's holding company structure may limit the payment of dividends.
• There are uncertainties regarding the interpretation and application of current and future PRC laws.
• The company faces risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers.
• The company may be subject to sanctions if found in violation of PRC laws and regulations.
• The company's auditor may be subject to PCAOB inspections, which could impact the company's listing status.
• The company's ability to receive funds from its subsidiaries may be limited by PRC regulations.
• The company may face difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends.

Future Outlook

The company aims to assist expressway operators in managing their digitized assets more securely and efficiently and to achieve vehicle-to-road data communication. Luokung also intends to expand its services for automakers and top-tier autonomous driving firms. The company is also focusing on the carbon neutrality natural resource asset service business.

Management Comments

• Luokung aims to assist expressway operators in managing their digitized assets more securely and efficiently.
• Luokung aims to achieve vehicle-to-road data communication where vehicles can digitally receive roadside information that affects safety, convenience and comfort in real time.
• Luokung believes that road-to-vehicle coordination is the keystone for smart travel and autonomous driving in the future.
• Luokung believes that its data service helps policymakers, industry regulators and market service participants monitor real situation and data changes, in their efforts to reduce carbon emissions.

Industry Context

This announcement comes amid increasing interest in smart transportation, autonomous driving, and carbon neutrality, which are key areas of focus for Luokung. The company's focus on HD maps and spatial-temporal data aligns with the growing demand for these technologies in various industries.

Comparison to Industry Standards

• Luokung's focus on HD maps and spatial-temporal data is comparable to companies like HERE Technologies and TomTom, which are also major players in the mapping and location services industry.
• The company's involvement in smart transportation projects, such as the Changjiu Expressway, is similar to initiatives undertaken by other companies in the intelligent transportation systems (ITS) sector.
• Luokung's remote sensing data processing services for carbon neutrality and natural resource asset management are similar to those offered by companies in the geospatial analytics and environmental monitoring space.
• However, Luokung's financial performance, with significant losses, contrasts with the more established and profitable companies in these sectors.
• The company's reliance on a VIE structure and its exposure to Chinese regulatory risks are unique challenges compared to its global competitors.

Corporate Governance

Stakeholder Impact

• Shareholders may experience a decline in share price due to the resale of a large number of shares.
• Investors face risks associated with the company's VIE structure and exposure to Chinese regulations.
• Employees may be affected by the company's financial performance and regulatory challenges.
• Customers may be impacted by the company's ability to deliver its services due to regulatory and financial risks.
• Creditors may be affected by the company's financial performance and ability to repay debts.

Next Steps

• The selling shareholders may offer all or part of the securities for resale from time to time through public or private transactions.
• The company will pay certain expenses associated with the registration of the resale of these securities.
• The company will need to continue to monitor and comply with evolving Chinese laws and regulations.
• The company will need to manage the potential negative impact on its stock price due to the resale of shares.

Key Dates

Keywords

Luokung Technology Corp, ordinary shares, resale, debt-to-equity conversion, VIE structure, China, regulatory risks, cybersecurity, data privacy, financial losses, smart transportation, HD maps, remote sensing, carbon neutrality