F-1/A: TuanChe Limited Files Amendment No. 1 to Form F-1, Outlines Resale of ADSs by Selling Shareholder

TuanChe Limited's Amendment No. 1 to Form F-1 details the potential resale of American Depositary Shares by a selling shareholder, with the company not receiving proceeds from the sale but potentially benefiting from warrant exercises.

Summary

• TuanChe Limited filed Amendment No. 1 to Form F-1 with the SEC on February 21, 2025, regarding the resale of up to 761,719 American Depositary Shares (ADSs) by a selling shareholder.
• Each ADS represents 240 Class A ordinary shares.
• These ADSs are issuable upon the exercise of warrants from a securities purchase agreement dated October 24, 2024.
• TuanChe will not receive any proceeds from the resale of ADSs by the selling shareholder, but will receive the exercise price if the warrants are exercised for cash.
• The company intends to use the proceeds from warrant exercises for working capital and general corporate purposes.
• The selling shareholder may offer or resell the ADSs from time to time through public or private transactions at prevailing market prices or negotiated prices.
• The selling shareholder will bear all commissions and discounts related to the sale, while TuanChe will cover registration costs.
• The ADSs are listed on the Nasdaq Capital Market under the symbol TC, with the last reported sale price on February 20, 2025, at US$0.81 per ADS.
• TuanChe's ordinary shares consist of Class A (one vote per share) and Class B (15 votes per share) shares, with Class B shares convertible to Class A.
• TuanChe Limited is a Cayman Islands holding company with no substantive operations, conducting its value-added telecommunications business in mainland China through subsidiaries and VIEs.
• Investors in the ADSs are purchasing equity securities of the Cayman Islands holding company, not the VIEs.
• The company relies on contractual arrangements with VIEs due to PRC laws restricting foreign investment in value-added telecommunications services.
• The company plans to conduct the VIEs current businesses through its subsidiaries in mainland China and cease substantially all of the operation of the VIEs within the next three to five years.
• The company faces risks associated with its corporate structure and potential intervention from the PRC government.
• The company's ability to pay dividends depends on dividends from its subsidiaries in mainland China, which are subject to PRC regulations.
• The company is subject to the Holding Foreign Companies Accountable Act (HFCA Act) and may be delisted if the PCAOB cannot inspect its auditor for two consecutive years.
• Investing in the ADSs involves a high degree of risk, including the risk of losing your entire investment.

Sentiment

Score: 5

Explanation: The document is neutral in tone, primarily providing factual information about the resale of ADSs and related agreements. The inclusion of risk factors tempers any positive interpretation.

Positives

• The company may benefit from warrant exercises if the selling shareholder's warrants are exercised for cash.
• The company plans to conduct the VIEs current businesses through its subsidiaries in mainland China and cease substantially all of the operation of the VIEs within the next three to five years.

Negatives

• TuanChe will not receive any proceeds from the resale of ADSs by the selling shareholder.
• The company operates in China through a VIE structure, which carries specific risks.
• The company is subject to potential delisting under the HFCA Act if PCAOB inspections are impeded.

Risks

• The VIE structure involves unique risks to investors, as they are purchasing equity securities of a Cayman Islands holding company rather than equity securities of the VIEs.
• The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in the company's operations and/or a material change in the value of the securities being registered for sale.
• The company may encounter difficulties in its ability to transfer cash between subsidiaries in mainland China and other subsidiaries largely due to various PRC laws and regulations imposed on foreign exchange.
• The PRC government may exert, at any time, substantial intervention and influence over the manner of the company's operations, and the rules and regulations to which the company is subject, including the ways they are enforced, may change rapidly and with little advance notice to the company or its shareholders.
• Trading in the company's securities on any U.S. stock exchange and the U.S. over-the-counter market may be prohibited under the HFCA Act or the Accelerating Holding Foreign Companies Accountable Act if the SEC subsequently determines the company's audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely.

Future Outlook

The company plans to conduct the VIEs current businesses through its subsidiaries in mainland China and cease substantially all of the operation of the VIEs within the next three to five years. The company currently intends to retain all future earnings to finance the VIEs and its subsidiaries operations and to expand their business and does not expect to pay any cash dividends in the foreseeable future.

Industry Context

This announcement reflects the ongoing trend of Chinese companies using VIE structures to navigate foreign investment restrictions, while also facing increasing regulatory scrutiny from both Chinese and U.S. authorities. The potential delisting risk under the HFCA Act highlights the broader challenges faced by Chinese companies listed on U.S. exchanges.

Comparison to Industry Standards

• Comparable companies using VIE structures include Alibaba, Baidu, and JD.com.
• These companies also face similar regulatory risks and uncertainties related to their VIE structures and potential delisting under the HFCA Act.
• The potential delisting risk under the HFCA Act is a common concern for Chinese companies listed on U.S. exchanges, and many companies are exploring alternative listing options in Hong Kong or other markets.

Stakeholder Impact

• Shareholders may experience dilution if the warrants are exercised and new shares are issued.
• The share price may be influenced by the selling shareholder's resale activity.
• The company's financial position may be strengthened if the warrants are exercised and the company receives the exercise price.

Next Steps

• The selling shareholder will determine the timing and method of reselling the ADSs.
• The company may receive proceeds from warrant exercises, depending on the selling shareholder's decisions.
• The company will continue to monitor and comply with PRC and U.S. regulations.

Key Dates

Keywords

ADS, American Depositary Shares, TuanChe, resale, warrants, selling shareholder, China, VIE, HFCA Act, PCAOB, SEC, delisting