F-1: Zhibao Technology Inc. Files for Resale of Ordinary Shares and Warrants

Sentiment:

Registration Statement 10 January 2025 4:16 PM

Zhibao Technology Inc. is registering for the resale of Class A ordinary shares and warrants by existing shareholders, aiming to fulfill obligations under previous agreements.

Capital raiseThe company may receive up to $50.0 million in aggregate gross proceeds from GEM under the GEM Purchase Agreement in connection with sales of the Class A ordinary shares at varying purchase prices after the date of this prospectus.The company may receive proceeds from the cash exercise of the Common Warrants, which, if exercised in cash at the current applicable exercise price of (i) $3.95 per share with respect to 467,800 Class A ordinary shares issuable upon the exercise of the GYBL Warrant, (ii) $2.81 per share with respect to 184,788 Class A ordinary shares (as adjusted from 160,020 Class A ordinary shares pursuant to the Section 3(d) of the Third Closing Warrant) issuable upon the exercise of the Third Closing Warrant and (iii) $2.81 per share with respect to 240,000 Class A ordinary shares issuable upon the exercise of the Waiver Warrant, would result in gross proceeds to us of up to approximately $3.04 million.

Summary

Zhibao Technology Inc., a Cayman Islands-based company, has filed a registration statement for the resale of up to 32,278,481 Class A ordinary shares.
The shares are to be resold by existing shareholders, including GEM Global Yield LLC SCS, GEM Yield Bahamas Limited, and L1 Capital Global Opportunities Master Fund.
These shares include those issuable under a share purchase agreement with GEM, commitment fee shares, and shares issuable upon exercise of warrants held by GYBL and L1.
The company will not receive any proceeds from the resale of these shares, but may receive proceeds from the cash exercise of warrants, estimated at up to $3.04 million.
The company intends to use the net proceeds from any cash exercise of the Common Warrants for working capital and general corporate purposes.
The filing also addresses regulatory requirements and potential risks associated with operating in China, including cybersecurity and data protection concerns.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights growth strategies and potential capital raising, it also emphasizes significant risks and uncertainties associated with operating in China and the volatility of the company's stock.

Positives

The company has completed a cybersecurity review with respect to its initial public offering closed on April 3, 2024 and is not required to do the cybersecurity review for this offering.
The company has access to a $50 million share subscription facility with GEM, providing potential capital for future growth.
The company has the potential to receive approximately $3.04 million from the cash exercise of warrants, which can be used for working capital.

Negatives

The company will not receive any proceeds from the resale of shares by the selling shareholders.
The market price of the company's Class A ordinary shares may be volatile.
The sale of shares to GEM will cause dilution to existing securityholders, and the resale of the Class A ordinary shares by GEM, or the perception that such resales may occur, could cause the price of our shares to fall.
The company is subject to regulatory risks associated with operating in China, including cybersecurity and data protection concerns.

Risks

The company's Class A ordinary shares may be delisted under the HFCA Act if the PRC adopts positions at any time in the future that would prevent the PCAOB from continuing to inspect or investigate completely accounting firms headquartered in mainland China or Hong Kong.
Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our Class A ordinary shares could decline in value or become worthless.
Our business processes a certain quantity of personal information, and failure to protect private or sensitive information of customers or improper handling of such information could have a material and adverse effect on our business. In light of recent events indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, financial condition, results of operations, and the offering.
The CSRC has recently released the New Overseas Listing Rules for China-based companies seeking to conduct overseas offering and listing in foreign markets, effective as of March 31, 2023. The New Overseas Listing Rules requires any post-listing follow-on offering by an issuer in an overseas market, including issuance of shares, convertible notes and other similar securities, shall be subject to filing requirement within three business days after the completion of the offering. Under the New Overseas Listing Rules, the PRC government exerts more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our Class A ordinary shares to investors and could cause the value of our Class A ordinary shares to significantly decline or such shares to become worthless.
Within our direct holding structure, substantial uncertainties exist with respect to the requirement of National Financial Regulatory Administration and how it may impact the viability of our current corporate structure, corporate governance and business operations.

Future Outlook

The company intends to grow its business by expanding B channels, increasing its sales force, driving additional conversions for existing end customers, upgrading its digital insurance solutions and PaaS, and expanding the scale of the MGU business.

Industry Context

Embedded insurance brokerage is still at an early stage of development in China, but the company believes it is the future of the insurance brokerage industry.

Stakeholder Impact

Shareholders may experience dilution due to the issuance of new shares.
Shareholders may experience volatility in the market price of the company's Class A ordinary shares.
The company's ability to pay dividends is dependent on the performance of its PRC Subsidiaries.

Next Steps

The company is required to submit the filing report to the CSRC within three business days upon the SECs declaration of effectiveness of the registration statement on Form F-1.
The company intends to use the net proceeds from any cash exercise of the Common Warrants for working capital and general corporate purposes.

Key Dates

Date	Description
November 17, 2011	Sunshine Insurance Brokers was incorporated in Shanghai.
November 24, 2015	Zhibao China (WFOE) was formed in Shanghai.
January 4, 2016	Zhibao China acquired Sunshine Insurance Brokers.
July 12, 2016	Zhibao China acquired Shanghai Anyi.
January 1, 2018	The PRC Enterprise Income Tax Law became effective.
December 18, 2020	The Holding Foreign Companies Accountable Act (HFCA Act) was signed into law.
February 15, 2022	The Cybersecurity Review Measures (2021 version) became effective.
March 31, 2023	The Trial Measures came into effect.
September 1, 2022	The Outbound Data Transfer Security Assessment Measures became effective.
January 11, 2023	Zhibao Technology Inc. was incorporated in the Cayman Islands.
January 12, 2023	Zhibao BVI was incorporated.
January 19, 2023	Zhibao HK was incorporated.
March 23, 2023	The Tax Concessions Act (Revised) Undertaking was given to Zhibao.
March 31, 2023	The New Overseas Listing Rules came into effect.
July 29, 2024	Zhibao Labuan Reinsurance was incorporated.
September 23, 2024	The Company entered into a Securities Purchase Agreement with L1.
October 1, 2024	The Company received additional funding from L1 in a second closing of the first tranche.
October 24, 2024	Zhibao Labuan Reinsurance received a license approval.
December 11, 2024	The Company and L1 consummated the third closing of the first tranche.
December 16, 2024	The Company entered into the GEM Purchase Agreement and Waiver Agreement with L1.
December 16, 2024	The Company issued a warrant with a 36-month term to GYBL.
January 7, 2025	The last reported sale price for our Class A ordinary shares was $1.50 per share.
January 10, 2025	Date of the preliminary prospectus.

Keywords

Class A ordinary shares, resale, warrants, GEM, L1, China, regulatory, securities, offering, Zhibao

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