TC.NASDAQTuanche LTD
20-F: TuanChe Limited Details Shareholder Rights and Corporate Governance in 20-F Filing
Sentiment:
Annual Results
TuanChe Limited's 20-F filing outlines the rights of shareholders, including those holding American Depositary Shares (ADSs), and details aspects of the company's corporate governance structure.
Capital raiseThe company may need to sell additional equity or debt securities or obtain a credit facility.The company's ability to obtain additional capital is subject to a variety of uncertainties.
Worse than expectedThe company's net revenues decreased by 9.3% from RMB183.2 million in 2022 to RMB162.4 million (US$22.9 million) in 2023.The company's net loss was RMB166.5 million in 2022 and RMB83.0 million (US$11.7 million) in 2023.
Summary
- TuanChe Limited's 20-F filing details the rights associated with Class A ordinary shares and ADSs, each representing 240 Class A ordinary shares.
- The document explains the dual-class voting structure, where Class A shares have one vote and Class B shares have fifteen votes.
- It outlines dividend entitlements, conversion rights of Class B shares, and procedures for share transfer and liquidation.
- The filing also covers potential change of control scenarios, including anti-takeover provisions and shareholder meeting requisitions.
- Differences between Cayman Islands law and U.S. corporate law are highlighted, particularly regarding mergers, shareholder suits, and director fiduciary duties.
- The document describes the terms of warrants and pre-funded warrants issued in a registered direct offering, including exercise prices and duration.
- It details the rights and obligations of ADS holders, including dividend distribution, voting rights, and fees.
- The filing also addresses potential risks, including reliance on China's automotive industry, dependence on industry customer collaboration, and competition in the NEV market.
- The document mentions material weaknesses in internal control over financial reporting and potential liquidity risks.
Sentiment
Score: 4
Explanation: The document presents a mixed picture. While it provides detailed information about the company's structure and operations, it also highlights significant risks and challenges, including financial losses, regulatory uncertainties, and potential difficulties in maintaining internal controls. The overall tone is cautious.
Positives
- The document outlines the process for PCAOB inspections of the company's auditor.
- The company has collaboration arrangements with NEV technology solution providers and manufacturers in China.
- The company has taken measures to rectify defects in livestreaming services by entering into collaboration arrangements with the operators of livestreaming platforms holding the requisite permits.
Negatives
- The voting power of Class A ordinary shares may be materially limited due to the super voting power conferred upon holders of Class B ordinary shares.
- The company acknowledges material weaknesses in its internal control over financial reporting.
- The company faces potential liquidity risks in its operations.
- The company has a limited track record in operating in the NEV industry.
- The company may face intense competition in China's NEV market, and demand for NEVs may be cyclical and volatile.
- The company's successful expansion into the NEV industry largely depends on its ability to develop, manufacture and deliver NEVs of high quality, safety, reliability and consumer appeal, on schedule and at a large scale.
- The company and the VIEs have incurred net losses in the past and may incur losses again in the future.
Risks
- The company relies on China's automotive industry for its net revenues and future growth.
- The company's business is substantially dependent on collaboration with industry customers.
- The company may face intense competition in China's NEV market.
- The agreements that establish the structure for operating some of the company's operations in China to be found not compliant with PRC regulations relating to the relevant industries.
- The influence of the PRC government on the company's operations.
- The approval from government authorities for the company's future offshore offering under PRC law.
- The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.
Future Outlook
The company plans to continue to leverage its strategic relationships with existing third-party business partners and potentially establish new relationships with more partners in order to grow its business, especially the NEV business.
Industry Context
The document provides context on the regulatory environment for foreign investment in value-added telecommunications services in China, which is a key aspect of TuanChe's business model.
Comparison to Industry Standards
- The document mentions Autohome and Bitauto as competitors, suggesting that TuanChe operates in a similar space of online automotive marketplaces.
- The document mentions that the company's lack of business liability or disruption insurance is consistent with customary industry practice in China.
Related Party Transactions
- The company entered into outsourcing service agreements with Shanghai Three Drivers Culture Media Co., Limited (STDC), of which the company owns 49% equity interest.
- The company provided RMB13.6 million and RMB12.6 million, respectively, to Mr. Wei Wen, the chairman of the board, the chief executive officer of our company, who used the fund to assist business development with third parties on behalf of our company, and Mr. Wei Wen repaid RMB13.7 million to us in 2022 and repaid RMB12.5 million to us in 2023.
- The company received a loan of RMB1.5 million from the spouse of Mr. Hui Yuan, the chief operating officer of our company.
Stakeholder Impact
- The document outlines the rights and obligations of ADS holders, providing clarity on their entitlements.
- The document highlights potential risks that could affect the value of the ADSs, impacting investors.
- The document mentions potential changes in labor costs and employee benefits, which could affect employees.
- The document mentions the company's reliance on industry customers, indicating their importance to the company's success.
Next Steps
- The company plans to continue to implement measures to remedy the material weaknesses in internal control over financial reporting.
- The company plans to continue to leverage its strategic relationships with existing third-party business partners and potentially establish new relationships with more partners in order to grow its business, especially the NEV business.
Key Dates
| Date | Description |
|---|---|
| 2000 | Wei Wen founded Bright Sunshine Technology Co., Ltd. |
| September 2000 | The Telecommunications Regulations of PRC were promulgated. |
| December 2001 | The Provisions on the Administration of Foreign-Invested Telecommunications Enterprises were issued. |
| 2002 | Wei Wen founded Beijing Puhua Hengxin Consulting Co., Ltd. |
| 2003 | Wei Wen founded Beijing Yiyang Online Internet Service Center. |
| 2006 | Wei Wen founded Beijing Guoyuan Innovative Technology Co., Ltd. |
| September 2007 | The Regulation on Security Administration of Large-scale Mass Activities was promulgated. |
| January 2008 | The PRC Enterprise Income Tax Law became effective. |
| March 2009 | The Administrative Measures on Telecommunications Business Operating were promulgated. |
| April 2009 | The State Administration of Taxation (SAT) issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies (SAT Circular 82). |
| June 2010 | Beijing municipal government issued interim regulations to control the quantity of small passenger cars in the city. |
| August 2011 | The SAT issued a bulletin to provide more guidance on the implementation of SAT Circular 82. |
| August 2011 | MOFCOM issued the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises. |
| February 2012 | SAFE issued the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in a Stock Incentive Plan of an Overseas Publicly-Listed Company (SAFE Circular 7). |
| June 2012 | The SAT promulgated the Announcement on How to Recognize the Beneficial Owner in Tax Treaties. |
| September 2012 | TuanChe Limited was incorporated in the Cayman Islands. |
| October 2012 | TuanChe Information Limited was established in Hong Kong. |
| December 2012 | The Standing Committee of the NPC issued the Decision on Strengthening the Protection of Online Information. |
| January 2013 | TuanYuan Internet Technology (Beijing) Co., Ltd. was established in China. |
| March 2013 | TuanYuan entered into contractual arrangements with TuanChe Internet and its shareholders. |
| March 2013 | TuanChe raised an aggregate of US$700,000 from the issuance of Series A preferred shares. |
| July 2013 | The MIIT issued the Order for the Protection of Telecommunications and Internet User Personal Information. |
| September 2013 | The PRC government released a plan for the prevention and remediation of air pollution. |
| September 2013 | TuanChe raised an aggregate of US$5,564,856 from the issuance of Series B-1 and Series B-2 preferred shares. |
| July 2014 | SAFE promulgated the Notice on Relevant Issues Relating to Foreign Exchange Control on Domestic Residents Investment and Financing and Round-Trip Investment through Special Purpose Vehicles (SAFE Circular 37). |
| August 2014 | TuanChe raised an aggregate of US$23,658,593 from the issuance of Series C-1 and Series C-2 preferred shares. |
| March 2015 | SAFE promulgated SAFE Circular 19. |
| September 2015 | Highland 9 LUX S..r.l. transferred Series C-2 preferred shares to Highland Capital Partners 9 Limited Partnership, Highland Capital Partners 9-B Limited Partnership, and Highland Entrepreneurs Fund 9 Limited Partnership, and China Equities HK Limited. |
| December 2015 | TuanChe entered into a convertible loan agreement with Lanxi Puhua Juli Equity Investment L.P. |
| June 2016 | SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange Settlement (SAFE Circular 16). |
| June 2016 | The MIAIS Regulations were issued. |
| October 2016 | TuanChe began auto show business. |
| June 2017 | TuanChe raised an aggregate of US$8,682,770 from the issuance of Series C+ preferred shares. |
| June 2017 | TuanChe issued 6,261,743 Series C+ preferred shares to Puhua Group Ltd. |
| July 2017 | The Automobile Sales Measures became effective. |
| August 2017 | TuanChe raised an aggregate principal amount of US$6,300,000 through issuing notes. |
| October 2017 | The SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (SAT Bulletin 37). |
| November 2017 | The Domain Names Measures became effective. |
| February 2018 | The SAT promulgated the Notice on Issues Related to the Beneficial Owner in Tax Treaties. |
| June 2018 | The convertible notes were converted into Series C-4 preferred shares. |
| June 2018 | TuanChe raised an aggregate of US$23,350,000 from the issuance of Series D-1 preferred shares. |
| June 2018 | TuanChe began the operation of virtual dealership business. |
| September 2018 | TuanChe raised US$50,000,000 from the issuance of Series D-2 preferred shares. |
| October 2018 | TuanChe raised US$2,300,000 from the issuance of Series D-2 preferred shares. |
| November 20, 2018 | The ADSs were listed on the Nasdaq Capital Market. |
| November 23, 2018 | TuanChe completed an initial public offering of 2,600,000 ADSs. |
| January 2019 | TuanChe commenced special promotion event services. |
| March 2019 | The National People's Congress (NPC) passed the PRC Foreign Investment Law. |
| October 2019 | TuanChe commenced referral services in collaboration with a commercial bank. |
| October 2019 | The CBIRC and other eight PRC regulatory agencies promulgated the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies. |
| January 2020 | TuanChe completed the acquisition of Longye. |
| February 2020 | The SAT promulgated the Announcement of the State Administration of Taxation on Issues Relating to Beneficial Owner in Tax Treaties (Circular 9). |
| May 2020 | The CBIRC promulgated the Notice of the China Banking and Insurance Regulatory Commission on Promulgation of the Interim Measures for the Supervision and Administration of Finance Leasing Companies. |
| May 2020 | The NPC promulgated the Civil Code of PRC. |
| June 2020 | The Standing Committee of the NPC promulgated the PRC Data Security Law. |
| July 2020 | The MIIT issued the Notice on the Further Special Rectification of Apps Infringing upon Users Personal Rights and Interests. |
| December 2020 | The NDRC and the MOFCOM promulgated the Measures for Security Review of Foreign Investment. |
| February 4, 2021 | The Circular Regarding Further Optimizing the Cross-border Renminbi Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly promulgated by the Peoples Bank of China (the PBOC), the NDRC, MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the CBIRC and SAFE became effective. |
| June 22, 2021 | The U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act. |
| July 6, 2021 | The relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law. |
| July 30, 2021 | The State Council promulgated the Regulations on Protection of Critical Information Infrastructure. |
| August 20, 2021 | The Standing Committee of the NPC issued the Personal Information Protection Law. |
| October 29, 2021 | The CAC publicly solicited opinions on the Measures for the Security Assessment of Data Cross-border Transfer (Draft for Comments). |
| November 12, 2021 | Mr. Wei Wen withdrew the non-binding going-private proposal. |
| November 14, 2021 | The CAC publicly solicited opinions on the Administrative Measures for Internet Data Security (Draft for Comments). |
| December 2, 2021 | The SEC adopted amendments to finalize the implementation of disclosure and documentation measures. |
| December 15, 2021 | The PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. |
| December 27, 2021 | The NDRC and MOFCOM jointly issued the Negative List (2021 Version). |
| December 29, 2022 | The Accelerating Holding Foreign Companies Accountable Act was signed into law. |
| January 21, 2022 | TuanChe announced its preliminary plan to expand into and develop the new electric vehicle business. |
| February 15, 2022 | The Measures for Cybersecurity Review took effect. |
| April 1, 2022 | TuanChe ceased to operate the referral services. |
| May 1, 2022 | The latest amendment to the Provisions on the Administration of Foreign-Invested Telecommunications Enterprises issued by the State Council came into effect. |
| July 7, 2022 | The Measures for the Security Assessment of Data Cross-border Transfer was adopted. |
| August 26, 2022 | The PCAOB signed a Statement of Protocol (the Protocol) with the CSRC and Ministry of Finance of China. |
| September 1, 2022 | The Measures for the Security Assessment of Data Cross-border Transfer took effect. |
| November 21, 2022 | TuanChe entered into a securities purchase agreement with certain accredited investors. |
| November 25, 2022 | TuanChe completed a registered direct offering with investors. |
| December 15, 2022 | The PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. |
| February 17, 2023 | The CSRC released the Overseas Listing Trial Measures and five supporting guidelines. |
| February 24, 2023 | The CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises. |
| March 13, 2023 | TuanChe adopted its 2023 Share Incentive Plan. |
| March 31, 2023 | The Overseas Listing Trial Measures and the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies came into effect. |
| May 1, 2023 | The Administrative Measures for Internet Advertising (the Internet Advertising Measures) came into effect. |
| August 16, 2023 | The compliance period of 180 calendar days to regain compliance with Nasdaqs minimum bid price requirement ended. |
| November 30, 2023 | TuanChe Limited adopted the Compensation Recovery Policy. |
| January 26, 2024 | TuanChe Limited changed the ratio of the ADSs to Class A ordinary shares from the then ADS ratio of one ADS to sixteen (16) Class A ordinary shares to a new ADS ratio of one ADS representing two hundred and forty (240) Class A ordinary shares. |
| February 8, 2024 | The closing bid price of the ADSs had been at US$1.00 per ADS or greater for 10 consecutive business days. |
| February 9, 2024 | TuanChe received a notification letter (the Compliance Notice) from the Listing Qualifications Department of Nasdaq, informing us that the closing bid price of the ADSs had been at US$1.00 per ADS or greater for 10 consecutive business days from January 26 through February 8, 2024, and accordingly, we regained compliance with the Nasdaq Listing Rule 5550(a)(2). |
| March 28, 2024 | Date of report. |
Keywords
ADS, ordinary shares, warrants, corporate governance, financial reporting, Cayman Islands law, dual-class structure, VIE, China, securities
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