F-1/A: STAK Inc. Files F-1/A for Unit Offering, Faces Dilution

STAK Inc. is offering 6 million units, each comprising Class A Ordinary Shares and Warrants, in a move expected to significantly dilute existing shareholders.

Summary

• STAK Inc., a Cayman Islands holding company operating in China, is filing an F-1/A for a public offering of 6,000,000 units.
• Each unit consists of one Class A Ordinary Share and one and one-half Warrants, with each whole Warrant exercisable for one Class A Ordinary Share.
• The Warrants have a three-year term, are exercisable upon the second anniversary of issuance, and have an initial exercise price of 120% of the offering price.
• A maximum of 9,000,000 Class A Ordinary Shares are underlying the Warrants.
• The offering price is assumed to be $0.41 per Unit, based on the average closing price of Class A Ordinary Shares on Nasdaq for the ten trading days preceding December 26, 2025.
• The company's Class A Ordinary Shares are listed on Nasdaq under the symbol STAK, having commenced trading on February 26, 2025, following an IPO that raised $5.6 million gross proceeds.
• Post-offering, STAK Inc. will have 10,010,349 Class A Ordinary Shares and 9,200,000 Class B Ordinary Shares outstanding, with Class B shares carrying 30 votes each.
• Mr. Chuanbo Jiang, CEO and Chairman, will beneficially own 83.7% of Class B shares, representing 80.8% of total voting power after the offering.
• The company's net tangible book value as of June 30, 2025, was $0.75 per share, which is expected to decrease to $0.64 per share on a pro forma basis after this offering, resulting in an immediate dilution of $0.11 per share for existing shareholders and an increase of $0.23 per share for new investors.
• Net proceeds from this offering are estimated at approximately $2.34 million, with 40% allocated to research and development and 60% to working capital and general corporate purposes.
• The company's business involves the research, development, manufacturing, and sale of oilfield-specialized production and maintenance equipment, including various types of trucks and specialized components, with a focus on automation solutions.

Sentiment

Score: 4

Explanation: The filing outlines a capital raise that provides funds for R&D and working capital, which is positive for growth. However, it also highlights significant immediate dilution for existing shareholders, substantial control by a few individuals, and numerous, material risks associated with operating in China, including regulatory uncertainties and potential delisting. The lack of a public market for the units/warrants and expected share price volatility also contribute to a cautious outlook.

Positives

• The company is described as a fast-growing entity specializing in R&D, manufacturing, and sale of oilfield-specialized production and maintenance equipment.
• Its in-house developed automation products aim to offer efficient, energy-saving, and environmentally friendly solutions for oilfield operations.
• STAK Inc. has received support from the local government in Changzhou, China, including being listed as a prospective company for securities exchange listing and inclusion in the 'Long Teng Action Plan'.
• The company's auditor, HTL International, LLC, is U.S.-based, registered with the PCAOB, and subject to PCAOB inspection, mitigating immediate delisting risks under the HFCA Act.
• STAK Inc. has completed the required CSRC filing procedures for its initial public offering on August 9, 2024.

Negatives

• The offering is expected to cause immediate and substantial dilution to existing shareholders, with a pro forma decrease of $0.11 in net tangible book value per share.
• There is no established public trading market for the Units or the Warrants, and the company does not intend to list them, limiting their liquidity.
• The Warrants are speculative in nature, and their market value is uncertain.
• The issuance of up to 15,000,000 Class A Ordinary Shares (including those underlying Warrants) is likely to cause the market price of Class A Ordinary Shares to fall.
• The company has a dual-class share structure with different voting rights (Class B shares have 30 votes each), and a high concentration of voting power (96.5% held by directors, officers, and principal shareholders), limiting the influence of other shareholders.
• STAK Inc. is a Cayman Islands holding company with no material operations, conducting business through PRC operating entities, exposing investors to unique legal and operational risks associated with mainland China.
• Uncertainties and rapid changes in the PRC legal system, including government oversight and control over overseas offerings and foreign investment, could negatively impact the business.
• The company does not hold a special vehicle production permission and relies on outsourcing for final vehicle assembly, posing a risk if outsourcing is restricted or capacity is exceeded.
• The COVID-19 pandemic significantly impacted business operations in 2021, 2022, and early 2023, affecting product demand and manufacturing capacity.

Risks

• Operating history may not be indicative of future growth or financial results, and the company may not sustain historical growth rates or profitability.
• The demand for oil equipment operates in a volatile industry, often correlating with oil and natural gas prices, making future prospects difficult to evaluate.
• Failure to maintain and enlarge the customer base or strengthen customer engagement may adversely affect business and results of operations.
• Failure to maintain product and service quality could materially and adversely affect reputation, financial condition, and results of operations.
• Dependence on cooperation with business partners means the business may be negatively affected if partners do not continue relationships or if their operations fail.
• The company may experience significant liability claims or complaints from customers, litigation, and regulatory investigations and proceedings.
• Intense competition from new entrants and established companies with greater resources poses a challenge.
• Dependence on key executives and highly qualified managers means their retention is crucial.
• Pandemics, epidemics, natural disasters, terrorist activities, and political unrest could disrupt operations.
• Uncertainties and quick changes in the PRC legal system could negatively impact business operations, decrease share value, and limit legal protections.
• Increased Chinese government oversight and control over overseas offerings and foreign investment may limit the ability to offer or continue to offer shares.
• The company is subject to CSRC filing procedures for subsequent securities offerings, and failure to comply could result in fines and hinder capital raising.
• Difficulties may arise in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against the company or its management.
• Reliance on dividends and other distributions from PRC Subsidiaries means limitations on their ability to make payments could adversely affect the company's cash and financing requirements.
• The Chinese government may intervene in or influence operations at any time, potentially impacting the value of securities.
• PRC regulation of loans and direct investment may delay the use of offering proceeds for PRC Subsidiaries.
• Class A Ordinary Shares may be delisted under the HFCA Act if the PCAOB is unable to inspect the company's auditors for two consecutive years.
• Uncertainties exist with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• Failure to make adequate contributions to employee benefit plans and withhold individual income tax as required by PRC regulations may subject the company to penalties.
• The company does not hold a special vehicle production permission and relies on outsourcing, which could restrict growth if outsourcing is not allowed or capacity is insufficient.
• There is no public market for the Units or the Warrants, and no market is expected to develop, limiting liquidity.
• The Warrants are speculative in nature, and their market value is uncertain.
• Holders of Warrants will not have rights of Class A Ordinary Shareholders until Warrants are exercised.
• The issuance of Class A Ordinary Shares in the public market as a result of this offering is likely to cause the market price of Class A Ordinary Shares to fall.
• The market price and trading volume for Class A Ordinary Shares have been and may continue to be volatile.
• If securities or industry analysts do not publish research or reports, or if they adversely change recommendations, the market price and trading volume could decline.
• Shareholders will experience immediate and substantial dilution in net tangible book value, with further dilution upon warrant exercise.
• The company does not expect to pay dividends in the foreseeable future, requiring reliance on price appreciation for investment return.
• Substantial future sales or perceived potential sales of Class A Ordinary Shares could cause the price to decline.
• Management has considerable discretion over the use of net proceeds, which may not produce income or increase share price.
• The company may need additional capital, potentially leading to further dilution or increased debt service obligations.
• Certain existing shareholders have substantial influence over the company (96.5% voting power), and their interests may not align with other shareholders.
• The company's emerging growth company status allows reduced reporting requirements, potentially limiting information available to investors.
• As a foreign private issuer, the company is exempt from certain U.S. domestic public company provisions, which may afford less protection to shareholders.
• Loss of foreign private issuer status in the future could result in significant additional costs and expenses.
• The company will incur increased costs as a public company due to compliance requirements.
• There is a risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, leading to adverse tax consequences for U.S. investors.
• The dual-class share structure may adversely affect the value and liquidity of Class A Ordinary Shares and could lead to exclusion from certain indices.
• Future issuances of Class B Ordinary Shares may be dilutive to holders of Class A Ordinary Shares and further concentrate voting power.

Future Outlook

The company intends to use the net proceeds from this offering primarily for research and development (40%) and working capital and other general corporate purposes (60%). It anticipates raising additional capital through equity or debt financing if current cash resources are insufficient. The company does not expect to pay cash dividends in the foreseeable future, intending to retain funds for business development and growth. The Warrants issued in this offering will be exercisable upon the second anniversary of issuance and expire three years after issuance.

Management Comments

• Chuanbo Jiang, CEO and Chairman of the board, led the core team's shift in focus to specialized oilfield equipment and integrated solutions in early 2020, leading to the establishment of YLAN.

Industry Context

STAK Inc. operates in the oilfield equipment industry, which is characterized by volatility and a strong correlation with oil and natural gas prices. The company's focus on in-house developed automation products for efficiency, energy-saving, and environmental friendliness aligns with broader industry trends seeking cost reduction and operational improvements in oilfield services. Its business model of manufacturing equipment and outsourcing final vehicle assembly is a common practice in specialized vehicle production.

Comparison to Industry Standards

• NA

Corporate Governance

Related Party Transactions

• Following the EGM on June 5, 2025, the company repurchased 7,700,000 Class A Ordinary Shares from Lanying Capital Limited (100% owned by CEO Chuanbo Jiang) and issued a corresponding number of Class B Ordinary Shares to Lanying Capital Limited.
• Similarly, the company repurchased 1,500,000 Class A Ordinary Shares from MT. Yang Holding Ltd (100% owned by COO Huyun Gao) and issued a corresponding number of Class B Ordinary Shares to MT. Yang Holding Ltd.

Stakeholder Impact

• Shareholders: Existing Class A Ordinary Shareholders will experience significant dilution in net tangible book value and potential share price decline due to the offering and future warrant exercises. Their influence on corporate matters is limited by the dual-class structure and concentrated voting power. New investors face immediate dilution.
• Management: The offering provides capital for R&D and working capital, supporting management's strategic initiatives. The dual-class structure and concentrated voting power ensure strong control for current management.
• Customers and Suppliers: The capital raise aims to fund R&D and operations, potentially leading to improved products and services, which could benefit customers. Continued business operations rely on maintaining strong relationships with suppliers and outsourcing partners.
• Creditors: The capital raise increases the company's cash position, which could improve its liquidity and ability to meet short-term obligations, potentially benefiting creditors.

Next Steps

• The Registration Statement on Form F-1 needs to become effective for the proposed sale to the public to commence.
• The closing of the sale of Units in this offering is expected to take place on or about the blank date in 2026.
• The company is required to submit filing materials to the CSRC within three working days after the completion of this offering.
• Net proceeds from the offering will be allocated: approximately 40% for research and development and approximately 60% for working capital and other general corporate purposes.
• The company may need to raise additional capital through equity or debt financing in the future.

Key Dates

Recommendation

While the capital raise provides funds for R&D and working capital, which are positive for future growth, the offering introduces significant dilution for existing shareholders and the warrants are speculative. The company operates in a volatile industry and faces substantial risks related to its operations in China, including regulatory uncertainties and concentrated voting power. The lack of a public market for the units and warrants, coupled with expected share price volatility, adds to the risk profile. Given these factors, a 'hold' recommendation is appropriate, advising investors to monitor the company's execution of its strategy and the evolving regulatory landscape in China before making further investment decisions.

Keywords

Oilfield Equipment, Specialized Vehicles, Automation Solutions, SEC Filing, F-1/A, Public Offering, Warrants, Class A Ordinary Shares, Class B Ordinary Shares, Dilution, China Risks, Corporate Governance, Nasdaq, STAK Inc., Emerging Growth Company, Foreign Private Issuer, CSRC, PCAOB, Dual Class Structure